80 per cent of population save due to lack of social security system

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New Delhi, Feb 8 (UNI) The country's high saving rate of more than 35 per cent of GDP may not be all virtuous as a NCAER-Max New York Life survey highlights that 80 per cent of the population save due to lack of a social security system.

Economists believe that high saving rate is also reflection of the scewed income distribution for the propensity to save of the rich is much higher than the poor.

The survey brings out while two-third of all savings are kept in form of liquid assets that in cash, bank and post office deposits-around a fifth of all investments are in the form of premium on insurance policy as compared to seven per cent in the case of shares and debentures.

The survey also brings out that the salaried classes are the bigger saver. Salaried employees comprise just 18 per cent of the households in the country, but they have the highest level of income (Rs 1,08,620 per annum) and the highest level of savings from it (33 per cent).

Indian households have different reasons for savings that range for emergencies to marriages to social events, children's education and gifts.

Saving for emergencies emerges as the top most priority with 83 per cent of the households saving for this purpose.

Children's education is another key priority with 81 per cent households attributing this as the reason for not spending.

The survey finding were released by Planning Commission Chairman Montek Singh Ahluwalia where he commended the findings and research mythology which entails measuring income distribution of the households.

He said the NSSO data measures consumption by household which does not give the correct picture of the inequality of income in the system.

This is because it is the richer households which saves. Thus income inequality measured by Gini Coefficient is a better index of economic inequality.

The key findings of the survey is that 36 per cent of the households prefer to keep their savings at home, notwithstanding the rapid stride and spread of the banking systems since independence.

More than half of Indian households (51 per cent) prefer to save by keeping these in bank deposits.

Households opting for post office deposits account for five per cent.

Co-operative society deposits , chit funds and bond are some of the other modes of savings. However, only two per cent opt for purchasing insurance policy.

A probability sample comprising of 63,016 households, out of a preliminary listed sample of 4,40,000 households, spread over 1,976 villages (250 districts) and 2,25 urban wards (342 towns) covering 64 NSS regions in 24 states was interviewed while executing the survey.

The survey revealed that 69 per cent households in the country save for reasons of old age financial security whereas 63 per cent households save to meet future expenses towards marriages, births and other social ceremonies.

Nearly 47 per cent households save to buy or build a house and a similar percentage is saving to improve or enlarge their business.

The survey said that 63 per cent of households save for social ceremonies with 64 per cent of rural households and 60 per cent of urban households saving specifically for this reason.

The percentage of households saving to buy a house is slightly higher in urban India (51 per cent) compared to rural India (45 per cent), the survey said.

UNI GS/MP PBB RR KP1107

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