The tradition of saving in India is long standing and continues despite modern financial changes. According to the Ecowrap report of State Bank of India (SBI), India’s savings rate is 30.2%, which is higher than the world average of 28.2%. With this saving rate, India has become the fourth largest saving country in the world. China (46.6%), Indonesia (38.1%) and Russia (31.7%) lead this list.
Change in saving methods
SBI report shows that the methods of saving in India have changed with time. Whereas in 2011 only 50% people used formal banking services, now this figure has increased to more than 80%. This makes it clear that financial services are now reaching more people.
Increasing demand for new investment options
People are now turning to new investment vehicles like mutual funds, shares and debentures instead of traditional savings like bank deposits and cash. Systematic Investment Plan (SIP) has also become quite famous as a medium of investment and investment in them has increased rapidly. The number of SIP accounts has increased four times to 4.8 crore as compared to 2018. Investment in shares and debentures has also increased. Ten years ago their contribution to GDP was only 0.2%, which has now become 1%.
Increase in net financial savings
Net financial savings, i.e. the share that people invest in financial assets, was 36% of total savings in 2014. This figure reached 52% in 2021. However, it recorded a slight decline in 2022 and 2023.
Relationship between capital market and economic development
The SBI report states that a 1% increase in market cap can increase GDP by 0.6%. In the last 10 years, there has been a significant increase in companies raising money through market cap. In 2014, companies had raised Rs 12,068 crore, which will increase to Rs 1.21 lakh crore by 2024. It is clear from the SBI report that India’s saving tradition and inclination towards modern investment is proving helpful in strengthening the country’s economy. The increasing use of new savings schemes and investment instruments is a positive sign for the economic development of the country.