Recent Blog Entries

  •   Salman Khan: Swara Bhaskar is Very Talented #SalmanKhan #SwaraBhaskar #VeryTalented Salman Khan’s upcoming movie Prem Ratan Dhan Payo is under the direction of Sooraj Barjatya. Salman Khan and Sonam Kapoor are playing lead roles in the film. Swara Bhaskar is playing Salman's sister...
  • Nickname of Ranveer Singh on ‘Bajirao Mastani’ sets #Nickname #RanveerSingh #BajiraoMastanisets Ranveer Singh’s upcoming movie, ‘Bajirao Mastani’ is under the direction of by Sanjay Leela Bhansali. According to the latest update, Ranveer Singh has got a new nickname...
View All

Share with your Friends.

Sponsored Links

Indians are saving less, government can do much to boost it

  • Two things are apparent from the Reserve Bank of India's recently-released annual report. Numbers there show that household savings fell sharply from 25.4% of GDP in 2009-10 to 22.8% of GDP the following year. The entire drop was due to a fall in financial savings, because households recorded a slight increase in physical assets.

    The fall in savings could be the fallout of a combination of high inflation and slowing income growth: at lower and middle income levels, families whose incomes fail to keep up with rising prices are likely to save less rather than curtail consumption.

    There are few textbook remedies about how to boost savings: hiking interest rates is more or less the only answer. But rates in India have been high for quite some time and it is unlikely that further increases will help. Boosting growth — and, therefore, incomes — by pumping in new investment could address the problem to everyone's satisfaction. A rising tide lifts all boats and a surge in public investment could lift incomes across all wealth levels. The RBI has more recent data on the structure of financial savings.

    This seems to bear out the impact that high volatility, interest rates and recent policy fiddles have had on savers' behaviour. In the three years from 2009-10 to 2011-12, bank deposits have jumped from 36.6% of households' financial savings to 48.5%. Investments in equity, mutual funds and so on, which have been low earlier, have become minuscule.

    This shows people's aversion to risk and their flight from the volatility of financial markets to the relative calm of bank deposits, which now offer higher returns than in the past.

    Regulators and the government have added to the confusion by scrapping commissions to agents distributing post office, pension and other small savings products. This has reduced some high-cost debt for state governments, but also crippled the distribution of financial products.

    But there is some good news: Sebi has restored the expense ratio for mutual funds and kept it flexible. This can lead to better distribution of funds and an expansion of financial savings. Equity and debt funds and pensions must be strengthened to bring retail investors back to the markets.

Share with your Friends

(200 symbols max)

(256 symbols max)