Title: Household Savings & The Macroeconomy
Discussant: Saugata Bhattacharya
We conducted the 18th Consumer Pyramids Research Seminar on 10 March 2022 at 07.00 PM IST.
Dr Indradeep Ghosh and Rohith Krishna presented their paper on household savings in India, co-authored by Vinay Subramanian and Rakesh Nigam. The researchers presented their work on identifying relationships between micro-level household saving behaviour and macro-aggregates, during the six years between 2014 and 2019.
The paper finds relevance at the intersection of three strands of literature, namely, macro-aggregate analysis of savings, composition of household finances, and the relation between household finances and business cycles. The authors emphasized that their work attempts to merely uncover correlations and not to establish dynamic structural relationships or build theoretical models. The presentation highlighted strong correlations between household savings rate and macro-aggregate variables such as WPI, CPI, bank credit growth, and GDP. Household savings rate was found to be positively correlated to WPI but negatively correlated with CPI. The authors also observed a puzzling absence of correlation between saving rate and expectations of inflation.
Mr Saugata Bhattacharya, the discussant for the paper, examined the nature of some of the macro-aggregate variables used in the study, using data from NSO and RBI. He raised a question on how the lower income deciles are able to sustain the negative savings rate identified in the paper. Mr Bhattacharya also highlighted the economic shock of demonetization in 2016 and how household perception of the shock would have affected savings rate. He asserted that the CPI would be far more important to examine when explaining consumption and saving behaviour than the WPI.
The authors responded to several questions from the audience and the session ended with Dr Ghosh responding to the points raised by Mr. Bhattacharya.