Household savings and invesitments: A key driver of indian financial system

Savings and investments lay down a concrete bed for all economic activities as both play an important role in economic development. Among other Asian countries, India enjoys a high domestic savings rate excelling from 23.10% (1990–91) to 33.00% (2014–15) and it is estimated to touch 40% by 2020. Gross value added (GVA) at current basic prices (%) by the three sectors namely public, private and household sectors has been progressing well over a period of time. The rate of contribution to GVA at current basic prices (%) by private sector has bettered among all the three sectors. It has moved up from 33.90% (2011–12) to 35.80% (2015–16). The individuals are engaged in one or the other occupations and thereby earn income and they are inspired by several factors to save and invest out of such income from time to time. Among them, family commitments, old age life, contingencies, steady and regular income, capital appreciation, tax benefits, insurance policies are the keys for savings and investments. On the other hand, the investment of household sector in financial assets has jumped up from Rs 10, 244 billion (2012–13) to Rs 12, 356 billion (2014–15). Among all financial assets, the investment in provident and pension funds has increased by Rs 768 billion i.e. from Rs 1240 billion in 2012–13 to Rs 2008 billion in 2014–15. Among all financial assets, the bank deposits are the most preferred form of investment (i.e. 46.90%) by the household sector during 2014–15. To encourage the savings and investments of the household sector, this paper suggests that some measures may be initiated such as protection of investors ’interest, more tax benefits, curbing blade and dabba companies, more financial inclusion, expansion of branches of various financial institutions, paperless networking, dissemination of information, rapport with the investors, curbing black money, etc.