The RBI annual report is a treasure trove of data. The 2013-14 report has some interesting facts and figures, which points towards a fall in gross financial savings to 30.1 per cent in FY13 compared to 31.3 per cent in FY12. The reason stated for this drop is the decline in the rate of household physical savings. However, the overall household savings marginally increased to 7.2 per cent of GDP in 2013-14 from 7.1 per cent of GDP in 2013-13 and 7 per cent in 2011-12, which needs to factor in the drop and then rise in the GDP rate over the 3-year period.
The household money is finding its way into deposits, especially commercial banks and small savings. This shift has resulted in a decline in money finding its way into mutual funds, by as much as 40 per cent, as deposits gained 17 per cent. Money finding way into deposits touched ₹6.9 lakh crore in FY14. In fact, banks account for 59 per cent of the household savings, of which 53 per cent are deposits with commercial banks. Expectedly, after bank deposits, life insurance is the next most sought after financial instrument in which households park their savings.
Despite the long-term wealth creation possibility when invest in equities; investments in equities accounted for only 2.87 per cent of the financial savings of households in FY14, which was a decline from 4.18 per cent in FY13, when significant portion of money found its way into equities.
In recent months we have seen retail investors investing in equity schemes by a higher number with the inflows crossing ₹10,000 crores. The fact that the markets are scaling new highs; one may witness a reversal in the trend with more money going to equities next year.
The change in union budget this year, has the necessary ingredients to change the way the numbers will reflect next year.
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