BLIND SPOTS” AND “TENTATIVES”- EVIDENCE OF THE DUNNING KRUGER EFFECT (DKE) IN FINANCIAL LITERACY IN WORKING AGE POPULATION COHORT IN INDIA

Abstract

This study investigates the gap between perceived and actual financial literacy (FL) among working adults in India using the Dunning-Kruger Effect (DKE) framework. By examining both objective FL (OFL), measured through a 16-question test and subjective FL (SFL), assessed via a 5-point Likert scale, the research identifies patterns of overconfidence ("blind spots") and under-confidence ("tentatives") across socio-demographic groups. Data from an online survey of 447 participants reveal significant disparities in FL, particularly lower advanced knowledge relative to basic financial skills. Notably, men, older individuals and higher-income groups demonstrate higher FL, while the DKE manifests as overestimation in low-FL individuals and underestimation in those with high FL. This study uniquely integrates socio-economic variables in a rapidly developing market context, uncovering culturally specific financial cognition patterns that challenge Western-centric models. The findings have important implications for targeted policy and educational interventions aimed at improving financial decision-making and reducing socio-economic vulnerability in emerging economies.