Household Savings in the Indian Economy
What has caused the changes in the savings ratio over time?
DOI:
https://doi.org/10.55763/ippr.2025.06.05.001Abstract
In this paper, we examine the changes in the savings ratio over time in India, from FY 1950-51 to 2022-23. We observe four major structural breaks in the household savings rate data, reflecting important changes in its behaviour over time. We focus on understanding the primary drivers of the household savings rate, as it accounts for more than 70% of total savings, and attempt to identify the factors behind its decline after 2008. We have also investigated the key determinants of household savings, including income levels, income growth, per capita income, and wealth inequality, to understand how these variables shape savings behaviour over time. Our findings indicate that while household savings rose steadily for several decades, they declined significantly in the most recent period. The current decline in savings rate in the Indian economy is a matter of concern. The reduction in household savings rate has been only partially offset by an increase in private corporate savings rate. The future borrowing program of public sector will have to be modified in this context of changing size and pattern of savings. This has implication for the level of fiscal deficit.
Keywords:
Gross Domestic Savings Rate, Household Savings Rate, Private Corporate Savings Rate, Government Savings Rate, Gross National Disposable Income, Structural Breaks, InequalityDownloads
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