Abstract
India is on the edge of a demographic revolution with a rapidly rising working-age population. For the first time in this study, we investigate the role of the rising working-age population on per capita small savings in post offices and banks net of socio-economic characteristics using state-level panel data compiled from multiple sources for the period 2001–2018. Our comprehensive econometric assessment with multiple robustness checks provides three key findings: (1) per capita private savings is increasing because of India’s growing working-age population; thus, the ‘economic life cycle hypothesis’ is evidentially supported; (2) the demographic factors contribute around one-fourth of the per capita private savings inequality across Indian states; and (3) the demographic window of economic opportunity for India can yield maximum benefits in terms of private savings when accompanied by favourable socio-economic policies on education, health, gender equity, and economic growth.
Highlights
Despite receiving a considerable attention from economists and economic demographers globally, there is hardly any evidence on the impact of demographic change on private savings in India
Following the framework proposed by Loayza et al (2000a, b), the reliability of the basic results is verified by using multiple robustness tests along two dimensions: first, we employ alternative econometric techniques: (1) for the first time, we use regression-based inequality decomposition model to estimate the contribution of demographic differences to inequality in per capita private savings across Indian states; (2) we consider there is a possibility of endogeneity in the relationship between the working-age population and savings, as its impact on savings operates through the channels of education, health, gender equity, and economic growth
To the best of our knowledge, our paper is the first one to investigate the impact of demographic changes on per capita gross small savings in post offices and banks net of socio-economic characteristics using state-level panel data compiled from multiple data sources for the period 2001–2018
Summary
Despite receiving a considerable attention from economists and economic demographers globally, there is hardly any evidence on the impact of demographic change on private savings in India. It is important to document evidence on the relationship of population age structure and savings for the period after its onset This is the first study that employs state-level panel data of per capita private saving collections in post offices and banks, provided by the National Savings Institute, Ministry of Finance, Government of India, to study its relationship with demographic changes in the country. Following the framework proposed by Loayza et al (2000a, b), the reliability of the basic results is verified by using multiple robustness tests along two dimensions: first, we employ alternative econometric techniques: (1) for the first time, we use regression-based inequality decomposition model to estimate the contribution of demographic differences to inequality in per capita private savings across Indian states; (2) we consider there is a possibility of endogeneity in the relationship between the working-age population and savings, as its impact on savings operates through the channels of education, health, gender equity, and economic growth.
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