Trends and Patterns of House Hold Saving In India (Pre and Post Economic Reforms)

Savings play an important role in economic development and the major objective of government policy has been promotion of savings and capital formation in the economy as primary instruments of economic growth. This study aims to analyze trends and patterns of household saving (1950-2010) and to determine different saving functions which would possibly explain the long term saving behavior and saving potentials of the household sector. An Autoregressive Model is also used to find out the short term and long term impact. Data base for empirical analysis has been furnished by time series data for a period of 60 years, from 1950-51 to 2009- 10. Data has been taken from the Handbook of Statistics on the Indian Economy published by RBI (2010-11). The data for the time period 1950-2007 was for base year 1999-2000 have been converted to new series of database year 2004-05 to analyze the household and financial saving function. Regression analysis is done considering household and financial saving as the dependent variable and personal disposable income as the independent variable. The saving function has been analyzed for the whole period as well as the two sub periods, viz. pre economic reforms period and post economic reforms period. Different saving functions are determined which would possibly explain the long term saving behavior and saving potentials of the household sector. An Autoregressive Model is also used to find out the short term and long run impact. Results show that the household sector has been the main contributor to the total saving. MPS has shown improvement in the post economic reforms period over pre economic reforms period. Long run MPS is found to be higher than the short run. APS in the post economic reforms period is higher than pre-economic reforms period. The income elasticity of saving has dipped a little in the post economic reforms period. The accuracy of the analysis is dependent upon the accuracy of the data reported by the selected organization. The results shows that efforts are required to channel savings away from physical savings into financial savings, which will expand financial intermediation and provide more funds for investment.