Household Savings

The savings of the economy are mostly concentrated in the household sector in more recent years. For example, more than 100% of the domestic savings have originated from the household sector in 1988-89 due to negative savings in the public sector and insignificant savings in the private corporate sector in terms of percentages to the GDP. In 1997-98, the same proportion has come down to around 80% due to better performance of public sector and of the corporate sector.

The savings in the household sector are mobilised directly in the form of units of the Unit Trust, premiums to the LIC and other insurance companies, contribu¬tion to pension funds, provident funds, etc., which are contractual forms of savings. Savings in the form of currency and deposits with commercial and cooperative banks are direct voluntary savings in financial form. Indirect investments from the house¬hold sector are investments in the secondary markets through purchases of shares and debentures, etc. by banks and financial institutions.

The investments through provident fund and pension fund, UTI, etc. of household sector are also indirect investments. Investments in the new issues market are direct investments in the corporate sector by the households. At present, the direct investment in the corpo¬rate sector in the form, of shares and debentures excluding UTI and mutual funds hardly accounts for less than 10% of the total financial savings of the household sector.

Some forms of holding savings particularly in the form of currency are barren and unproductive while some are less productive, such as those in real estate or buildings, in the sense that there will be no further production of goods and services. There is a large scope in our economy not only to raise savings in financial form but also to increase the investment in shares and debentures through shifts of assets held by the household sector and investments to more productive forms available to savers.

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