Trends and Contribution of Savings of Different Types of Institutions towards Gross Domestic Product in India During the Post-reforms Era

Abstract

Accessibility to financial services is viewed as a vital determinant of economic and social development of any nation, particularly in a low income country like India. The availability of financial services and financial products is expected to permit household sector to be able to align income and expenditure pattern across time, to ensure themselves against income and expenditure shocks. Access to financial services increases the ability of individuals and households to have access to basic services like education and health simultaneously addressing the issues of poverty reduction. Domestic savings on the other hand play a critical role in financing the development of any economy by providing necessary resources for investment, boosting financial markets and stimulating the economic growth. Mobilization of savings from the household sector can have a significant impact on the growth by increasing the investment, productivity and enhancing the quality of human capital. However, household savings have been increasing consistently during the post reform period; the financial savings are grown at a less pace when compared to physical savings of the household sector. There are varied reasons for the slow growth of financial savings of the household sector, they are lack of accessibility to the financial services, lack of awareness, regulatory agencies stringent guidelines, low incomes of the households, high vulnerability of financial markets etc., are some of the reasons.