Growth and structure of savings in India : an econometric analysis.

The structure and growth of savings bear an important relationship to a country's development. Over the period 1950-86. which could be considered the first phase of India's economic growth, savings have shown a significant increase before eventually stabilizing.

This study uses econometric models to identify the principal determinants of savings behaviour in India. The three institutional sectors-household, private corporate and public-differ in respect of the way the decision to save is arrived at, and face different types of constraints. These sectors are therefore considered separately.

The main factors affecting the savings rate are growth in income, its distribution over sectors and income groups, and the growth of the financial sector. Their effect, as also the effect of rural-urban differences, inflation and substitution between financial and non-financial assets, is analysed using non-linear econometric models. Time series and cross-section data are used in a complementary way.

While the household sector registered a remarkable increase in its savings ratio, the private corporate and public sectors were less successful in this respect. The author uses a flow-of-funds framework to demonstrate how. these two sectors met their deficits by inter-sectoral borrowing.