Priyanka Parashar/Mint
Priyanka Parashar/Mint

18.7%: gross household savings percentage

Household savings are important, particularly in the Indian context, because of the low penetration of social security and life insurance protection

This was the gross household savings percentage in India in 2014-15, according to the annual report of the Reserve Bank of India for Financial Year (FY) 2015-16. This means that Indian households saved 18.7% of the gross national disposable income. The saving of the household sector is taken as the sum of its investments in various financial and physical assets. These savings have been falling since FY2011-12, when the ratio stood at 23%.

Household savings are important, particularly in the Indian context, because of the low penetration of social security and life insurance protection. The importance of household savings can also be judged from the fact that household savings are the biggest source of savings in India at the national level, followed by the private corporate sector and the public sector.

Gross financial savings of households went up marginally to 10.8% in FY2015-16, from 10% in FY2014-15. Within the financial savings, further details show that investors are moving to financial instruments other than traditional savings deposits.

Bank deposits have been marginally coming down for at least 3 years. In FY2015-16, deposits were estimated to have come down to 4.7% from 4.9% in FY2014-15.

At the same time, investments in market-linked products like mutual funds went up from 0.4% in FY2013-14 and 2014-15 to 0.7% in FY2015-16. This suggests that Indian households are warming up to financial products.

Between FY2014-15 and FY2015-16, household financial liabilities have also gone up from 2.5% in FY2014-15 to 3% in FY2015-16.

Effectively, the net financial savings of households stands at 7.7%. This is the difference between gross household financial savings and financial liabilities. Net financial savings stood at 7.5% in FY2014-15.

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