Thursday , December 26 2024

Saving rate in India higher than global average

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New Delhi: The trend of saving in India is centuries old. Even today India’s savings rate is higher than the global average. India’s savings rate is 30.2%, higher than the global average of 28.2%, according to a report by State Bank of India, the country’s largest public sector bank. India ranks fourth in terms of savings. China, Indonesia and Russia are ahead of India.

China’s savings rate is 46.6%, Indonesia’s 38.1% and Russia’s 31.7%. This strong savings culture reflects growing financial inclusion in the country, where more than 80% of adults now have formal financial accounts, compared to only 50% in 2011.

Due to various measures, household savings patterns have also changed, and there is now a greater inclination towards financial instruments.

According to the report, the share of net financial savings in total household savings has increased significantly over the last few years, from 36% in FY2014 to about 52% in FY2021. However, FY2022 and FY2021 saw a slight decline.

The share of traditional options like bank deposits and cash in financial savings is declining. At the same time, emerging investment options like mutual funds and equities are fast becoming the preferred option for household savings.

For example, new SIP registrations have increased four-fold to 4.8 crore since FY2018, with mutual funds becoming the number one choice to channelize household savings. At the same time, domestic investment in ‘shares and debentures’ was 0.2% of GDP in FY 2014, which increased to 1% in FY 2024 and contributed 5% to domestic fiscal savings. This shows that domestic savings are now increasingly contributing to meeting the country’s capital requirements.

According to the SBI report, high market capitalization is a sign of a strong economy and reflects growing investor confidence, which promotes overall economic growth. The report claims that a 1 percent increase in market capitalization leads to a 0.6 percent increase in gross domestic product (GDP) growth.

Along with this, the report also highlights that the amount of money raised by Indian companies from the capital market has increased 10 times in the last ten years. In financial year 2014 this amount was Rs. Which will increase to Rs 12,068 crore. 1.21 lakh crore.