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

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. The major players of India’s financial system are banking institutions, insurance companies, mutual fund companies, pension fund organizations, non banking financial institutions etc. Financial Services Sector being one of the wings of the financial system has been gaining prominent place in today’s rapidly globalizing economy. The present study attempts to assess the trends in mobilizing the savings from household sector and how the household sector invests the savings. What is the proportion of physical and financial savings of the household sector during the post reform period is studied. It is observed that, there has a significant shift in the savings of the household sector in the post reform era. But still, it is quite disheartening to address that the percentage of financial savings on other than deposits is indeed low. Sri JNPG College COMMERCE TODAY (A Peer Reviewed Annual Journal)