An Analysis of the Behavior and Composition of Savings in India

The Indian savings experience has been marked by varied oscillations since the inception of planning in India. In the period following the independence, India has witnessed a rising trend in the gross domestic saving rate, accompanied by many fluctuations over time though. Also, there have been many major shifts and substitutions within the composition of savings over the six decades. The objective of the present study is to examine the trend behavior and changing composition of savings in India over the planned economic era from 1950 to 2007. The study uses three indicators, namely, the trend growth of saving, the trend growth of saving rate and the average saving rate for an analysis of the trend behavior of savings in the country. On the basis of which, the entire six-decade period is decomposed into six distinct time periods or phases of saving—low-saving phase, increasing-saving phase, high-saving phase, stagnation phase, recovery phase and new-high-saving phase. For studying the changing composition of savings, the average share of saving components has been computed for different saving phases. After an extensive review of Indian savings, the study arrives at certain enlightening findings. There have been very important and major changes in the behavior and composition of savings in India over the analysis period. Household sector is the largest saver with the lion’s share in GDS. Private corporate sector saves very low, while the public sector even dissaves. There have been some dramatic and drastic substitutions within the saving composition, with household preferences shifting from the conventionally most sought after saving instruments such as currency, life funds, provident and pension funds to bank deposits, shares and debentures, and other small-saving assets.