Though CSO data on overall FY16 savings are not out, RBI data on household financial savings are encouraging. Compared to FY12, gross financial savings of households are up from 10.4% of gross national disposable income to 10.8% in FY16, and the jump is quite substantial compared to FY15’s 10%. The biggest shift is in the ‘shares and debentures’ segment where the jump is from 0.2% in FY12 to 0.4% in FY14 and FY15 and as much as 0.7% in FY16. This can also be seen from the assets under management of equity mutual funds, up from 1.7% of GDP in FY14 to 2.8% in FY16—while the bulk comes from the corporate sector, there is a significant increase in that invested by households.
While RBI has no data on physical savings, data from the World Gold Council shows a dramatic fall in the household purchase of gold, primarily due to the collapse in gold prices as the global economy has started looking a bit better. Gold demand fell from 857.4 tonnes in FY14 to 853.5 in FY15 and 788.9 in FY16. That meant a reduction from Rs 224,084 crore in FY14 to Rs 207,870 crore in FY15 and Rs 184,516 crore—or from 2% of GDP in FY14 to 1.7% in FY15 and 1.4% in FY16. In terms of gold jewellery, roughly a proxy for household demand for gold, this fell from 1.3% of GDP in FY14 and FY15 to 1% in FY16. In other words, even if overall household savings have remained flat—when the FY16 data is out—this is compatible with a rise in financial savings that RBI data shows; since it is this saving that is available for productive investment, that’s good news.
It is difficult to make any firm statements about bank deposits—as a proportion of gross national disposable income, these fell from 5.8% in FY14 to 4.9% in FY15 and 4.7% in FY16. Given that inflation fell, these should have risen—at least in FY15 when the real rate of interest on bank deposits rose to 3% from minus 0.5% in FY14—but the fact that they fell proves that household savings are more a function of income levels than of interest rates; RBI’s inflation-targeting plan, it should be kept in mind, began from the premise that households needed a positive rate of interest in order to save.