Household Savings

Financial Life insurance Funds Provident & Pension Funds Physical

Currenc y

Deposits

Claims on Shares & Govt. Debentures

Difference between a households disposable income (mainly wages received, revenue of the self-employed and net property income) and its consumption (expenditures on goods and services). Household savings rate is calculated by dividing household savings by household disposable income. A negative savings rate indicates that a household spends more than it receives as regular income and finances some of the expenditure through credit (increasing debt), through gains arising from the sale of assets (financial or non-financial), or by running down cash and deposits.

GROSS DOMESTIC SAVING AND INVESTMENT Item Per cent of GDP at current market prices Amount in ` crore

2004-05 to 2009-10

2007-08

2008-09

2009-10*

2007-08

2008-09 2009-10* P 7 8

1 Household Saving

2 23.3

3 22.5

4 23.8

5 23.5

11,19,829 13,31,033 15,36,071

of which : a) Financial Assets 11.2 11.7 10.8 11.8 5,81,935 6,00,141 7,71,527

b) Physical Assets

12.1

10.8

13.1

11.7

5,37,894 7,30,892 7,64,544

Ref- www.rbi.org.in

APPENDIX TABLE 4: FINANCIAL SAVING OF THE HOUSEHOLD SECTOR (GROSS)

Item 1 Financial Saving (Gross) a) Currency b) Deposits i) With Commercial Banks ii) With Non-banking Companies iii) With Coperative Banks and Societies iv) Trade Debt (Net) c) Share and Debentures of which : i) Private Corporate Business ii) Banking iii) Bonds of public Sector undertakings iv) Mutual Funds (including UTI) d) Claims on Government i) Investment in Government securities ii) Investment in Small Savings, etc.

Per cent to Total Financial Saving ` crore 2008-09 R 2009-10 R 2010-11 P 2008-09 R 2009-10 R 2010-11 P 2 3 4 5 6 7 100.0 100.0 100.0 7,26,889 9,91,582 10,43,977 12.7 9.8 13.3 92,188 96,940 1,39,344 60.7 47.2 47.3 441,063 4,67,575 4,93,237 52.8 41.7 42.0 3,83,679 4,13,313 4,38,048 2.0 1.9 2.9 14,742 19,220 30,343 4.7 3.6 2.5 34,154 36,140 25,943 1.2 -0.1 -0.1 8,488 -1,097 -1,097 -0.7 1.0 0.0 0.1 -1.4 -3.8 0.0 -3.8 4.6 1.3 0.1 0.1 3.3 4.3 0.0 4.3 -0.4 1.2 0.1 0.1 -1.8 6.5 0.0 6.5 -5,070 7,441 231 446 -10,450 -27,551 271 -27,822 45,338 12,758 954 606 33,041 42,872 389 42,484 -4,636 12,483 766 828 -18,713 67,954 321 67,633

e) Life Insurance Funds of which : i) Life Funds of LIC and private insurance companies f) Provident and Pension Funds R : Revised. P : Preliminary Estimates. Note : Components may not add up to the totals due to rounding off. Ref- www.rbi.org.in

21.0
20.3 10.1

22.6
22.0 11.5

24.2
23.8 9.1

1,52,861
1,47,795 73,397

2,24,487
2,17,973 1,14,369

2,52,919
2,47,993 95,159

A GDP growth of over 8% between 2004 and 2008-09 resulted into India's savings rate to surge over 30% of GDP. This fuelled investments in the economy, thus helping reduce dependence on foreign capital.
Recently, net financial savings in India dipped to 9.7% of GDP in FY11 compared with 12.1% a year ago.
Since increased household financial liabilities resulted due to higher prices have forced the people to spend more on daily expenses and also on loan repayments. Inflation of around 9.6% in FY11 forced the RBI to raise rates aggressively. The rising prices took a higher share of disposable incomes. With negative returns on deposits in real terms because of high inflation and sharp slide in stocks, there could have been reallocation of financial savings to nonproductive assets such as gold.

Ref: http://articles.economictimes.indiatimes.com/2011-08-26/news/29931650_1_financial-savings-savings-rate-incomes

Impact on Economy

Long-term economic growth requires capital investment in infrastructure, education and technology, for example, as well as in factories, business expansion, and so forth and the main domestic source of funds for capital investment is household savings.

Consistently high savings rates over time in a particular country can translate into funds being available for this long-term growth.
Higher levels of household savings allow a larger portion of a countrys overall debt to be financed internally.

Ref- http://www.gfmag.com/tools/global-database/economic-data/10396-household-saving-rates.html#axzz1cSe3zThM

Household Savings Rates of leading economies

Country United States United Kingdom 2005 1.4 3.9 2006 2.4 2.9 2007 1.7 2.2 2008 2.7 1.5 2009 4.3 7 2010 3.4 6.4 2011 3.6 5.4

In USA, before sub-prime crisis rate was as low as 1.7% due to easy credit facilities. After crisis it rose to 7% due to less credit available. Currently at 3.6%. Same is the case with UK.

Ref- http://www.gfmag.com/tools/global-database/economic-data/10396-household-saving-rates.html#axzz1cSe3zThM

Thanks

Presented ByAashish Biala Aashish Gaur Abhilasha Srivastava Amit Rai