Family orientation leads to higher savings and safer investments
Indian life emphasizes restraint on consumption. From a very young age, Indians are inculcated with the habit of spending less and saving more. Over- consumption, excessive usage and wastage are treated as sins to be avoided. Indian tradition teaches her citizens to be very careful with regard to the usage of resources. Hence there is a natural tendency to conserve resources.
Sacrifice for the near and dear ones and surrender of personal interests to that of the family is considered the foremost duty of the householders. As a result it is normal to see parents foregoing their own comforts for the sake of their children. Every father and mother feels that it is his or her duty to save as much money as possible inorder to give a better environment and education to their off-springs. Entrepreneurial ventures are initiated with the hope of leaving profitable enterprises to the succeeding generations.
Cutting down expenditures to a bare minimum and saving the maximum amount of money for the betterment of families remain the mantra of Indians. As a result the savings of the country has been continuously increasing over the years. The total amount of gross domestic savings was Rs.871 crores during 1950-51. It reached Rs.18, 11,585 crores during 2009-10. The official saving rate that stood at 8.6 per cent of GDP in 1950-51 has reached 33.7 per cent during 2009-10. Table 1 below presents the growth in gross domestic saving rate from 1950-51 to 2009-10.
Table 1 Gross Domestic Saving from 1950-51 to 2009-10
( as percentage of GDP)
Gross Domestic Saving
Source: Economic Survey 2010-11
The table shows a continuous increase in the rate of saving in the country during the past sixty years. It is important to note that the household sector has been contributing the maximum share in the total saving. It means the ordinary people of our country have been engaged in saving higher amounts of their earnings. The share of the household sector in the gross domestic saving was 70 per cent during 2009-10. The private corporate sector and the government sector have contributed the balance of 30 per cent.
Indians make savings in a variety of avenues. It is difficult to list all of them here as there are many indigenous avenues preferred by people in different localities. Some of them may not even be known to the third parties. For the sake of convenience, all of them may be classified as the official and other avenues. Details and figures are published by the governments for official savings. But such details and figures are not fully available for the other avenues of savings, including the indigenous methods. Hence the official rates of saving do not cover different types of savings that are in vogue. Even investment in gold, which is a highly popular mode of savings across the country, is not taken in the list of official savings.
But even when we take the official rate of saving, it remains high.
has one of the highest rates of saving in the world. When compared with the saving rates of the richer countries of the world, the rates of saving in India are many times higher. It is relevant to note here that in the recent past, the saving rates of the developed countries such as the India US and the went below zero per cent in some of the years. UK
Indians prefer to invest in safer avenues as compared to the riskier ones. Bank deposits remain the most popular type of official saving in the country. Table 2 provides the percentage shares of different financial assets of the household sector between 2006-07 and 2008-09.
Table 2 Financial saving of household Sector (2006-07 to 2008-09)
( percent to total gross financial saving )
Deposits with banks
Shares and debentures
Claims on Government
Provident and Pension Funds
P: Provisional #: Preliminary estimates
Source: Annual Report 2008-09, Reserve Bank of
Table 2 shows the preference of the Indian public towards bank deposits, insurance funds and provident and pension funds. While investments under the category of bank deposits have been increasing over the years, claims on government which used to attract a higher proportion of funds during the earlier periods have been declining in the recent years. The table shows the overall preference of the public towards secured investments. The proportion of funds invested in shares and debentures showed an increase during 2006- 07 and 2007-08, from the lower rates during the earlier periods, only to decline again in the following year. Investments in shares and debentures of companies are not in the high priority list of the Indian public, though the stock markets have become popular in recent years among certain sections of the society.
The total deposits in all the scheduled banks stood at Rs.1, 99,643 crores during 1990-91. The deposits increased over the years reaching Rs.52, 28,920 crores in February 2011. The per capita bank deposits have increased from Rs.15,357 to Rs.20,146, thereby registering a growth of more than 31 per cent during 2005-06 to 2008-09. One has to keep in mind that the world witnessed the global economic crisis during the above period, with its ripple effects giving troubles to the Indian economy. The western countries faced severe financial crisis resulting in the collapse of many banking companies, particularly in the
. But at the same time the per capita deposits have risen in US to higher levels. India
Three different studies conducted by Kanagasabapathi among different sections of people belonging to the educated and professional/ business groups in the industrial city of
reveal that people prefer investing their savings in safe and secured avenues such as the bank deposits, jewellery, house and insurance schemes. The reason mentioned for making such investments was the family orientation. The study showed that most of the respondents including the finance professors who teach stock market theories to the students do not like to invest in securities as they are complicated and risky. Coimbatore
1. Economic Survey 2010-11, Ministry of Finance, Govt. of
India, New Delhi
2. RBI Monthly Bulletin, April 2011, Reserve Bank of
, Mumbai India
3. Annual Report 2008-09, Reserve Bank of
, Mumbai India
4. P.Kanagasabapathi, ‘ Does family culture drive investments in bank deposits?’, JIMS 8M- The Journal of Indian Management & Strategy, Volume 15, No.3, Jagannath International Management School, New Delhi
( Yuva Bharati – Voice of Youth, Vol.38, No.10, May 2011)