Niyati Agrawal
Dvara Research
Rakshith S Ponnathpur
Dvara Research
Dvara Research Research Brief, Jan 2021
JEL Codes:
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● Analysing Trends in Indian Households Potential to Save
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Saving is an essential component of financial planning for households. It can help them cope with risks and emergencies, plan for life-cycle goals, and capture opportunities through investments in business and human capital. In this research brief, we use the income and expenditure data from the Centre for Monitoring Indian Economy (CMIE) to study the formal savings potential of the households over a period of six years, from January 2014 to December 2019. We define the formal savings potential as the surplus that is left with households after meeting all their monthly expenditure.2 We find that 75-80% of the households manage a surplus rate3 of almost 38.2% in India, which has been, on an average, increasing over time, unlike the household savings rate4 of the country. We argue that to increase the savings rate of the country, it is important to channelise this formal savings potential into formal savings instruments. We also map the differences in the formal savings potential of households across regions (urban/rural), income quintiles, and states.

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