A paisa saved is a paisa earned

Indians spend less and save more is well known. For example, on an average an Indian saves Rs 37.70 of every Rs 100 earned against Rs 4.2 by a US citizen. What’s not that well advertised is that thanks to schemes like NREGS, poor, rural Indians are also jumping onto the savings bandwagon. In fact, we’re saving more than ever: the saving rate just the previous year was Rs 36 for every Rs 100. Also, the recession has made Indians save even more. The saving rate among Indians has gone up from 30% in 2003-04 to 37.7% in 2008-09 with a 1% increase coming in the past two years alone. An assessment of savings done by the National Savings Institute has thrown up interesting revelations: Savings are more with regional rural and public sector banks. Dip in interest rates have increased investment in post offices. “Women labourers in NREGS ares 58% of the total in AP and a majority of these women are also members of Self-Help Groups. Because of NREGS, most are able to open a bank account. This has also reduced their dependence on chit funds. Since withdrawal in post offices is generally at maturity, this constraint on frequent withdrawal has also contributed to increasing the saving rate,’’ NSI, regional director, B Rajubabu said. Most proactive states in saving are: West Bengal, Uttar Pradesh, Gujarat, Maharashtra and Andhra Pradesh. “In West Bengal, small savings department exist from block level with more agents and this has encouraged saving habits among them. In some low performing states like Karnataka, small saving units are at district level and have not appointed new agents for past three years and are less proactive,” said B Rajubabu. Internationally, the US saving rate is lower principally because Americans on an average retire later and according to the US Bureau of Economic Analysis, 4.2% is personal saving rate, while in India, as per NSI, personal saving rate is 31%. Here, the saving rate is higher because proportion of people of working age is higher and people are credit constrained and have low social security coverage. While 80% of the savings are from urban areas, 20% is from rural areas in India. And, 90% of saving is from middle income group and from household savings. With Self-Help Groups authorised to collect money, banking has literally come to the doorstep and legally. That NREGS payments are made through post offices has also increased saving awareness among people. In Andhra Pradesh, 95% of the NREGS payments are made through post office.