Indian Household Savings Decline to 22.3 % in 2011-12: RBI survey

While financial savings rate fell, physical saving rate rose as households turned to physical assets as inflation hedge

The Reserve Bank of India (RBI) on recently expressed concern over steadily falling savings &  investment rates, especially the financial savings by households which slipped to 22.3% cent in 2011-12 as households turned to physical assets as a hedge against inflation.

Highlights of RBI Report...

** According to the annual Macroeconomic and Monetary Developments report released here this evening by RBI, household savings declined from a high 25.2 per cent in 2009-10 to 22.3 per cent in 2011-12. It had stood at 23.5 % in 2010-11.

** Within household savings, while the financial savings rate declined, physical saving rate rose as households turned to physical assets as inflation hedge.

** Persistence of high inflation with average headline inflation at nearly 9% in 2011-12 withered financial savings, as households attempted to stave off the downward pressure on their real consumption.

** While gross savings during the reporting period declined to a low 30.8% in 2011-12, down from 34% in the previous year and 33.7% in 2009-10, the gross capital formation declined to 35% in the reporting period from 36.8% in 2010-11 and 36.5% in 2009-10.

** The report also notes with concern that all the three (3) core sectors  - households, private and public sectors – witnessed a slowdown in savings, apart from an overall decline in investment rates during 2011-12.

** Financial savings by households steeply declined to a paltry 8% in 2011-12, from 12% two years ago and 10.4% in 2010-11.

** Indian's savings in physical assets have been on a steady rise and touched 14.3% in the reporting year from 13.1% a year before and 13.2% in 2009- 10..

** The decline in savings was more visible in the private corporates, at 7.2% in the reporting period from 7.9% a year before and 8.4% in 2009-10.

** The public sector fared a tad better with their savings rate at 1.3%, halving from 2.6% the year before but a steady improvement from the dismal 0.2% in 2009-10.

** The decline in the rate of investment in 2011-12 was mainly due to decline in the investment rate of the private corporate sector followed by that of the public sector even as the household investment rate increased.

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