Indians prefer spending to saving, says a study released Monday by insurance company Aviva Group Plc. The finding, if it is correct and statistically relevant, could be significant because economists say that India’s economic growth—an average 9% over the past two years— has been suppported primarily by domestic savings, of which household savings constitute the biggest chunk.
“There’s possibly been a decline in the marginal propensity to save and there’s been some increase in propensity to consume,” said Abheek Barua, chief economist at HDFC Bank Ltd, specifically referring to households that have an annual income of more than Rs2.5 lakh.
The India-related findings of the 24-country survey show that the propensity of Indians to spend, and not save, exceeds the global average.
“The idea of savings is well understood (in India); however, (a) booming economy tends to drive more spending,” said Rod Butcher, head of customer, Aviva Group Plc., while presenting the findings. Aviva did not disclose the list of countries where the survey was conducted. In India, the company’s survey on consumer attitude towards savings, which was carried out with the help of UK’s Henley Centre Headlight Vision, was based on a sample of 1,000 respondents located in five cities: Mumbai, New Delhi, Kolkata, Chennai and Bangalore.
“Dynamics (of savings) in metros would be different from smaller towns,” said HDFC Bank’s Barua.
Economists say key findings of the survey seemed correct intuitively, but maintain that it is premature to draw definitive conclusions about trends in India’s savings rate on the basis of this.
India’s savings rate, according to the last Economic Survey, was 32.4% in 2005-06, of which households contributed 22.3%. However, though the overall savings rate rose over the five years ended 31 March 2006, a big part of the growth came higher savings of private sector firms.