Household savings losing sheen: Survey

By agencies   |   Thursday, 21 July 2005, 07:00 Hrs   |    1 Comments
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CHENNAI: The major trend in household savings over the past decade has been a decrease in the relative importance of financial savings as compared to physical savings.

According to data recently released by the CSO, financial savings accounted for around 60 percent of total household savings from 1993/94 to 1996/97, except for a sharp dip in the year 1995/96, when they were down to less than 50 percent.

The average for the triennium 1993-1996 was 56.5 percent. The reasons for the intermediate dip are not clear.

Household savings as a percentage of GDP dropped more between 1995/96 and 1996/97 than between 1994/95 and1995/96. So neither the dip in financial savings in 1995/96 nor the upturn in 1996/97 can be attributed to changes in the ratio of household savings to GDP.

After 1996/97, however, there seems to have been a slow and steady drop in the percentage of household savings each year that was invested in financial instruments.

The average proportion of financial savings to total household savings for the triennium 2001-2004 was 46.9 percent.

To put it another way, there was a sharp trend increase in the proportion of household savings that went into physical assets each year. This led to a cumulative increase of about ten percentage points over the ten-year period.

A break up for physical assets, giving separate figures for land, housing, gold and so on is not available.

A little more than half the increase can be attributed to an increase in GDP at current prices, which went up by 147 percent between the first and latest trienniums.

The rest can be credited to the increase in household savings relative to GDP from 20.7 percent in the first triennium to 25.6 percent in the latest triennium.

Neither the CSO nor any other institution has tried to put together a reliable estimate of the total value of household assets at any given point of time, leave alone put together a series relating to any given period.

So there is no way of arriving at an estimate of the appreciation (or depreciation) in household assets over time that could have come about through a rise (or fall) in the value of investments in financial and/or physical assets, measured from the values prevailing at the time the investments were made.

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