The Reserve Bank on Thursday expressed concern over steadily falling savings and investment rates, especially the financial savings by households which slipped to 22.3 per cent in 2011-12 as households turned to physical assets as a hedge against inflation.
According to the annual
Macroeconomic and Monetary Developments report released by the Reserve Bank, household savings declined from a high 25.2 per cent in 2009-10 to 22.3 per cent in 2011-12. It had stood at 23.5 per cent in 2010-11.
"Within household savings, while the financial savings rate declined, physical saving rate rose as households turned to physical assets as inflation hedge. Persistence of high inflation with average headline inflation at about 9 per cent in 2011-12 withered financial savings, as households attempted to stave off the downward pressure on their real consumption," the report said.
While gross savings during the reporting period declined to a low 30.8 per cent in 2011-12, down from 34 per cent in the previous year and 33.7 per cent in 2009-10, the gross capital formation declined to 35 per cent in the reporting period from 36.8 per cent in 2010-11 and 36.5 per cent in 2009-10, the RBI report said.
The report also notes with concern that all the three core sectors - households, private and public sectors - witnessed a slowdown in savings, apart from an overall decline in investment rates during 2011-12.
Financial savings by households steeply declined to a paltry 8 per cent in 2011-12, from 12 per cent two years ago and 10.4 per cent in 2010-11, while their savings in physical assets have been on a steady rise and touched 14.3 per cent in the reporting year from 13.1 per cent a year before and 13.2 per cent in 2009-10, the report added.
The decline in savings was more visible in the private corporates, at 7.2 per cent in the reporting period from 7.9 per cent a year before and 8.4 per cent in 2009-10.
However, the public sector fared a tad better with their savings rate at 1.3 per cent, halving from 2.6 per cent the year before but a steady improvement from the dismal 0.2 per cent in 2009-10, according to the report.
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