Inflation-indexed bonds and other attractive financial saving opportunities may soon be headed your way, with the Economic Survey pitching for more reliable instruments to help boost financial savings and reduce the attractiveness of gold.
While the savings rate in the country reached an eight-year low of 30.8 per cent in 2011-12, the share of financial savings as against physical savings in households declined to 36 per cent in 2011-12 from a high of 55 per cent during the 1990s.
“In fact, household financial savings were lower by nearly Rs. 90,000 crore in 2011-12 vis-à-vis 2010-11,” the Survey said. Financial savings take the form of bank deposits, life insurance funds, pension and provident funds and shares and debentures.
The Survey pointed out that the proportion of shares and debentures in the total financial savings pie dipped drastically from nearly 13 per cent in the 1990s to a mere 4.8 per cent in the 2000s. “The reason for this can be attributed to the low returns on the BSE Sensex, coming down from nearly 21.4 per cent per annum to 10 per cent, and higher volatility. This, coupled with high inflation, is one of the reasons gold has become a safe haven,” it said, adding that acquisition of gold by households tended to have a negative impact on savings and financial investments.
However, the Survey maintained that the rising demand for gold was only a ‘symptom’ and emphasized that a greater variety of reliable financial savings opportunities such as inflation-indexed bonds could help in raising the share of financial savings.
“The financial savings of the household sector are likely to improve with lower inflation, especially as the real rate of return on financial savings rises,” it said.