Savings Behaviour in the Indian Economy

Abstract

An attempt has been made in the present exercise to examine the savings behaviour in the Indian Economy in terms of shift in the growth rates of domestic savings, and in magnitude of income elasticity of the domestic savings at the aggregate and disaggregate levels during post economic reform period. The results show that there is no shift in the growth rate of the domestic savings both at aggregate and disaggregate levels during post economic reform period. However there has been acceleration in the growth rates of domestic savings of household and private sectors and deceleration in public sector during 1950--2002. The estimate of constant income elasticity of household savings is found to be more than unity implying that the marginal propensity to save is higher than the average propensity to save, all else equal. Further the constant income elasticity of household savings is moderately higher than that of the income elasticities of domestic savings estimated for private and public sectors during pre economic reform period. The results point out that there is no shift in the magnitude of income elasticity of savings of household, private and public sectors during post economic reform period showing the homogeneity in the size of the income elasticity of domestic savings. Thus the economic reforms that have been initiated in 1992 could not bump up the growth rate of savings and magnitude of the income elasticity of domestic savings both at aggregate and disaggregate levels in the Indian Economy during post economic reform period.