Dalal Street Investments

HouseHold Savings in India Hit a 22 Year Low – Courtesy High Inflation + Bad Governance

August 28, 2012

It is a matter of great concern that Indian Household savings in Financial Products hit a 22 Year Low due to sustained High Inflation and Poor Governance of the Dr. Manmohan Singh Government embroiled in the Greatest Corruption scandals in the World.

This shift in composition is not surprising. In a continuously 3 year high inflation environment, low real returns deter financial savings (as consumption is front-loaded); instead, savings in physical assets rise as an inflation hedge.

The Following chart Shows Historical HouseHold Savings in India as %ge of GDP

Break-up of domestic savings data is not available. However, using close proxies, we estimate that household physical savings [Gold, Real Estate, etc] have hit an all-time high, leaving aggregate household savings rate
largely unchanged.

Lower financial savings are a negative for an investment-starved economy like India as they reduce the amount of investible funds available to finance domestic investment, thereby increasing the dependence on foreign capital.


2 Responses to “HouseHold Savings in India Hit a 22 Year Low – Courtesy High Inflation + Bad Governance”

  1. Venkat on September 2nd, 2012 8:40 PM

    Just not the government the main issue is corporate governance. Many of the private companies (including our top most company) have policy of cheating government and make profit; this is not just happened in the last decade it happens for more than 3 decade visibly.

  2. India's RBI Policy Won't Strengthen INR against USD - Need Strong Decisions to Curb BlackMoney Economy | FreePress India on July 30th, 2013 10:51 PM

    […] do not forget that Savings Rate in India is at an all time Low because the Corruption by Congress Government maintained the Inflation at Double Digit & hence […]

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