Household Savings Seen At 19.7% Of GDP Under 10th Plan

Mumbai, June 10: | Updated: Jul 11 2002, 05:30am hrs
The working group on domestic and foreign savings for the 10th five-year Plan has projected the rate of household savings at 19.7 per cent of the gross domestic product (GDP) during the period 2002-07.

This has been arrived at under the baseline scenario wherein the GDP growth rate at constant prices has been maintained at 6.5 per cent.

Under an alternative scenario, assuming an accelerated annual growth of eight per cent during the 10th Plan, the rate of houshold savings has been pegged at 19.9 per cent, the working group said in its report published in the latest RBI bulletin released on Wednesday.

Under the baseline scenario, the rate of household savings in financial assets is estimated at 11.4 per cent, while that of physical assets is projected at 8.3 per cent during the 10th Plan. In absolute terms, savings of the households during the plan period is expected to be Rs 34,3,434 crore consisting of Rs 19,75,478 crore in financial assets (57.2 per cent) and 14,77,956 crore (42.8 per cent) in physical assets.

Instrument-wise, the share of capital market-related instruments is anticipated to show a sharp increase, from 4.5 per cent during the first three years of the 9th Plan to 6.2 per cent during the 10th Plan.

The share of contractual savings is also likely to improve from 32.5 per cent to 37.8 per cent.

In contrast, the share of currency and deposits is expected to show a sharp decline. The household savings in the market-related is estimated at Rs 1,45,215 crore during the 10th Plan, the group said.

The group also said that several policy-initiatives have been taken to encourage contractual savings in the recent times. The opening up of insurance sector for private sector participation is expected to boost this savings channel further. Attempts are already being made to operationalise the report of the Committee on Old-Age, Social and Income Security (OASIS), which has underlined the need for individual financial participation in pension schemes, and conversion of present pension scheme into a funded one, the committee added. All these measures would lead to an increase in the relative share of contractual savings in the houshold sector from 3.9 per cent of GDP at market prices (GDPMP) during the first three years of the 9th Plan to 5.1 per cent of GDPMP during the 10th Plan.