IJMSS32Jan17-5988.pdf

IJMSS Vol.05 Issue-01, (January, 2017) ISSN: 2321-1784 International Journal in Management and Social Science (Impact Factor- 6.178) HOUSEHOLD SAVINGS AND INVESITMENTS: A KEY DRIVER OF INDIAN FINANCIAL SYSTEM Dr. Adinath B. Kuchanur Professor Department of Management (MBA) JSPM’s Rajarshi Shahu College of Engineering, Tathawade, Pune-411033, Maharashtra Abstract Savings and investments lay down a concrete bed for all economic activities as both play an important role in economic development. Among other Asian countries, India enjoys a high domestic savings rate excelling from 23.10% (1990-91) to 33.00% (2014-15) and it is estimated to touch 40% by 2020. Gross value added (GVA) at current basic prices (%) by the three sectors namely public, private and household sectors has been progressing well over a period of time. The rate of contribution to GVA at current basic prices (%) by private sector has bettered among all the three sectors. It has moved up from 33.90% (2011-12) to 35.80% (201516). The individuals are engaged in one or the other occupations and thereby earn income and they are inspired by several factors to save and invest out of such income from time to time. Among them, family commitments, old age life, contingencies, steady and regular income, capital appreciation, tax benefits, insurance policies are the keys for savings and investments. On the other hand, the investment of household sector in financial assets has jumped up from Rs 10,244 billion (2012-13) to Rs 12,356 billion (2014-15). Among all financial assets, the investment in provident and pension funds has increased by Rs 768 billion i.e. from Rs 1240 billion in 2012-13 to Rs 2008 billion in 2014-15. Among all financial assets, the bank deposits are the most preferred form of investment (i.e. 46.90%) by the household sector during 2014-15. To encourage the savings and investments of the household sector, this paper suggests that some measures may be initiated such as prote tio of i vestors’ i terest, ore tax e efits, ur i g lade a d da a companies, more financial inclusion, expansion of branches of various financial institutions, paperless networking, dissemination of information, rapport with the investors, curbing black money, etc. Key words: Household sa i gs a d I est e ts, I esto s p ote tio , “t i ge t laws, Tax benefits, I. Introduction Savings and investments are key drivers in carrying out the economic activities forward. History suggests that countries that were able to accumulate high levels of domestic investment largely financed by domestic savings achieved faster rates of economic growth and development. Household savings are defi ed as the diffe e e et ee a household s disposa le i o e I o e a d et p ope t i o e a d its consumption (Expenditures on goods and services). This is the reason that so much importance is given to these variables as reflected in the large number of studies undertaken in this area of economic research. Savings play an important role in economic development and the major objective of government policy has been the promotion of savings and capital formation in the economy as primary instruments of economic growth. Among other Asian countries, India enjoys a high domestic savings rate excelling from 23.10% (1990-91) to 33.00% (2014-15) and it is estimated to touch 40% by 2020. Household savings play an important role in economic development and the major objective of government policy is to promote savings and capital formation in the economy as primary instruments of economic growth. Capital is sought after for a ious e o o i a ti ities. I othe o ds, it is said Fi a e is the life lood of all e o o i a ti ities a gi g f o loss aki g u its to p ofit aki g u its. The A Monthly Double-Blind Peer Reviewed Refereed Open Access International Journal - Included in the International Serial Directories International Journal in Management and Social Science http://www.ijmr.net.in email id- [email protected] Page 263 IJMSS Vol.05 Issue-01, (January, 2017) ISSN: 2321-1784 International Journal in Management and Social Science (Impact Factor- 6.178) quantum of finance much depends on the nature of such economic activities. The smaller the size of organization the smaller is the amount of finance and vice versa. The finance is arranged from various sources such as issue of shares, debentures, accepting fixed deposits, borrowings, hand-loans etc. Among the investors, the household sector comprising individual investors plays a crucial role in the money and capital markets. The individuals need to save and invest in one or the other investment schemes depending upon their earnings and commitments. The more the earnings the more is the size of savings and investment and vice versa. It is worth to note that the rate of savings of household sector in India surpasses the rate of savings of public and private sectors. II. Review of Literature Many studies have been undertaken so far in the area of savings and investment activities. A brief mention of these studies and their results is being made in this section. This will help make the present study more meaningful and fruitful. A few important among others are reviewed for the purpose of the present study. Krishnamurty, K., Krishnaswamy, K.S. and Sharma P. D (1987) used rate of growth of income to explain the saving rate mainly for the household sector. Datta Roychoudhary, Uma (1968) studied household saving behavior using time series data since 1970-71. Her conclusions are that long run MPS has a higher value tha the si ple MP“ o AP“ a d also that the t a sito i o e has e little i flue e o household savings. Lewellen (1978) found investor age, income, sex essentially in that descending order of importance as the unquestionable character which over rode occupation, marital status, family size and educational background as significant influences in the explanation of different investment styles and strategies. The last four were found to make only occasional modest contributions. Berry (1982) advised bank marketers to think in terms of marketing investment portfolios tailored to specific liquidity, convenience, return, safety and tax sheltering preferences of the individual investor who could no longer be considered mere savers. Tamilkodi (1983) suggested that the small savings scheme was having a psychological appeal by providing an opportunity for the ordinary man, woman and even children. It reached a large number of people and covers a wide range of areas. She also suggested that efforts should be made to simplify the procedures of small savings scheme to suit the needs of illiterate and socially downtrodden people. Further she suggested the increase in the rate of interest of small savings schemes to meet the challenges of commercial banks. Rajarajan V. (1999) asserted that individual investors occupied a prominent place in the economic development of a nation. The savings pattern needed a considerable attention. He examined the relationship between the stage in life cycle of individual investors and their investment size and their investments in risky assets, on the basis of primary data collected from 405 individual investors. The study found the existence of systematic relationship among these factors. Don T. Johnson (2006) explained the rationale for producing an issue on the topic of real estate investing. Real estate is probably the largest category of assets for investors and the works in this issue would assist in the decision making processes of real estate investors. Walt A. Nelson (2006) made a study and the purpose of this case study was to examine direct investment in commercial real estate from the perspective of the individual. While most research is dominated by studies concerning direct investment by institutions, the bulk of direct investment in commercial property was still conducted by individuals. Tarujyoti Buragohain (2009) found that the income elasticity of savings provided a sufficient encouraging picture and these values have been increasing the economic resurgence period (1990-2007). This implied that household disposable income was a better determinant of household savings and it increased with increase in income. Haribaksh Singh & Kulbir Singh recommended the following in their study: i. Investors should make the investment with proper planning keeping in mind their investment objectives. A Monthly Double-Blind Peer Reviewed Refereed Open Access International Journal - Included in the International Serial Directories International Journal in Management and Social Science http://www.ijmr.net.in email id- [email protected] Page 264 IJMSS Vol.05 Issue-01, (January, 2017) ISSN: 2321-1784 International Journal in Management and Social Science (Impact Factor- 6.178) ii. Investors should read the offer document carefully before investing in any scheme of mutual funds and life insurance. iii. Investors should also consult the brokers or agents to seek information and advice, but their de isio should ot e el e ased o age ts ad i e o thei o a eful i estigatio . iv. The investors should select a particular investment option on the basis of their need and risk tolerance. v. The investors should diversify their investment portfolio in order to reduce the risk. vi. The investors should continuously monitor their investments. vii. The financial institutions should provide all relevant information to the investors. Ghosh attempted to investigate the causes for shift in household savings from savings in physical assets to savings in the financial assets since 1970-71. Pandit (1991) is the comprehensive one of the structure and growth of saving in India. He also found that the composition of household financial saving is driven by the rates of return on each type of financial saving and to some extent, by bank expansion. Athukorala and Sen (2002) is the comprehensive Indian case study of saving, investment and growth in India. The empirical analysis found strong empirical support for the view that the levels of investment as well as its efficiency are the proximate causes of growth. Upender et al. (2007) examined savings behavior in the Indian economy in terms of the shift in the growth rates of domestic savings, and in magnitude of income elasticity of the domestic savings at the aggregate and disaggregated levels during the post economic reform period. III. Household Savings Rates in the third world during 2015 Household savings rate varies from country to country depending upon their gross domestic production, per capita income, people life style, education, etc. In other words, the rate of household savings depends on the developed, underdeveloped and undeveloped status of a country and changes yoy. Hence, it is necessary to understand the rate of household savings in the select countries. The data pertaining to the rate of household savings in the select countries is presented in Table 1. Table 1 Household savings rates in the third world Sl. No Country 2010 2011 2012 2013 2014 2015 1 Australia 9.77 11.12 10.47 10.43 9.45 8.91 2 Austria 9.28 7.88 9.22 7.34 7.80 8.68 3 Belgium 8.19 6.59 6.36 4.99 5.10 3.98 4 Canada 4.29 4.42 5.21 5.17 4.02 4.10 5 Czech Republic 7.61 5.90 6.17 5.52 5.71 5.54 6 Denmark 2.13 0.92 -0.05 -0.39 -6.47 -4.06 7 Estonia 3.29 4.14 1.44 3.88 3.14 2.93 8 Finland 3.17 1.31 0.71 1.34 -0.25 0.82 9 Germany 9.97 9.56 9.26 9.14 9.52 9.55 10 Hungary 6.77 7.55 5.54 5.44 7.26 9.02 11 Ireland 9.56 7.25 8.47 8.13 6.94 6.86 12 Italy 4.10 3.60 1.85 3.91 3.39 3.80 A Monthly Double-Blind Peer Reviewed Refereed Open Access International Journal - Included in the International Serial Directories International Journal in Management and Social Science http://www.ijmr.net.in email id- [email protected] Page 265 IJMSS Vol.05 Issue-01, (January, 2017) ISSN: 2321-1784 International Journal in Management and Social Science (Impact Factor- 6.178) 13 Japan 1.99 2.66 1.23 -0.15 0.85 2.42 14 Korea 4.66 3.86 3.90 5.60 6.97 7.24 15 Luxembourg 13.05 13.57 13.74 16.43 16.76 17.34 16 Netherlands 4.89 5.79 6.82 7.34 8.21 8.53 17 New Zealand 2.74 1.46 2.30 2.15 3.21 3.44 18 Norway 3.95 5.80 7.13 7.59 8.49 8.36 19 Poland 3.02 -0.49 -0.53 0.71 2.14 3.16 20 Slovak Republic 4.66 2.88 1.74 2.91 3.82 3.86 21 Slovenia 6.11 5.54 3.19 5.65 6.49 6.63 22 Spain 3.69 4.65 2.63 4.20 3.88 2.88 23 Sweden 11.02 12.73 15.32 15.07 15.32 15.83 24 Switzerland 17.01 17.84 18.69 19.03 18.28 17.82 25 United States 5.61 6.02 7.63 4.76 4.80 4.87 26 Euro area (15 Countries) 7.08 6.82 6.18 6.44 6.48 6.54 Sources: Economic Outlook No: November 24, 2015 Table 1 reveals that the rate of household savings of Luxembourg has jumped up by 4.29% i.e. from 13.05% (2010) to 17.34% (2015) and that of Switzerland by 0.81% i.e. from 17.01% (2010) to 17.82% (2015) during a 5 year period. On the other hand, the rate of household savings of Japan recorded an increase by 0.43% i.e. from 1.99% (2010) to 2.42% (2015). However, the rate of household savings of Denmark plummeted by – 6.19% i.e. from 2.13% (2010) to – 4.06% (2015) during a period of 5 years. This trend shows that the rate of household savings in many countries has gigantically moved up and down during the last 5 year period. IV. Gross value added (GVA) GVA is defined as the value of output less the value of intermediate consumption. Value added represents the contribution of labor and capital to the production process. When the value of taxes on products (Minus subsidies on products) is added, the sum of value added for all resident units gives the value of gross domestic product (GDP). Thus, Gross Domestic Product GDP of any nation represents the sum total of GVA (i.e. without discounting for capital consumption or depreciation) in all the sectors of that economy during the said year after adjusting for taxes and subsidies. The contribution to GVA at current basic prices (%) is presented in Table 2. Table 2 Contribution to GVA at current basic prices (%) Sl. No Sectors 2011-12 2015-16 1 Public sector 20.60 19.40 2 Private sector 33.90 35.80 3 Household sector 45.50 44.80 100.00 100.00 Total A Monthly Double-Blind Peer Reviewed Refereed Open Access International Journal - Included in the International Serial Directories International Journal in Management and Social Science http://www.ijmr.net.in email id- [email protected] Page 266 IJMSS Vol.05 Issue-01, (January, 2017) ISSN: 2321-1784 International Journal in Management and Social Science (Impact Factor- 6.178) Source: Economic Survey of India, 2015-16 Table 2 shows the contribution to GVA at current basic prices (%) by the three sectors namely public, private and household sectors. The rate of contribution to GVA at current basic prices (%) by private sector has bettered among the sectors. It has moved up from 33.90% (2011-12) to 35.80% (2015-16). On the other hand, the rate of contribution to GVA at current basic prices (%) of public sector declined from 20.60% (2011-12) to 19.40% (2015-16) and that of household sector from 45.50% (2011-12) to 44.80% (2015-16). V. Objectives of the study The following are the objectives of the present study 1. To trace the motives of household savings and investments and 2. To analyze various indicators of savings and investments. VI. Motives of savings and investment of household sector (i.e. individuals) The individuals are engaged in one or the other occupations namely agriculture, service, business, profession and other economic activities which fetch a particular size of income. However, the size of income varies from one occupation to other occupations. For example, the income of daily wage earners is obviously lesser than those who are engaged in business or profession. The more lucrative the occupation, the more is the size of income and vice versa. Therefore, the size of income of an individual influences on the size of his sa i gs a d i est e t as ell. “a i gs is the diffe e e et ee the i di idual s i ome and his expenditures during a specified time say one year whereas the investment is the difference between the savings and conspicuous consumption and other borrowed money. Savings and investment are essential for every individual. The following are the some important motives of savings and investments that instigate the household sector (i.e. individuals). 1. Family commitments: Individuals live in a society wherein there are certain responsibilities shouldered by each and every family. A family having children is bound to make arrangements for thei hild e s edu atio a d a iage o e a pe iod of ti e. The fa il sta ts the activity of savings and investment well before it is blessed with a child when the expenditures are assumed to be minimal. As and when, the family is blessed with more children who grow older and older, the fa il s espo si ilities also ou t ea o ea basis. Hence, every family is committed to save and invest in those assets of its choice keeping in mind the risk associated, maturity period, return, repayment schedule, etc. Therefore, the family commitments i.e. children education and marriages, festivals, gifts to deprived and donations to temples, etc are the forces behind the activity of savings and investment by individuals. 2. Old age life: The death is certain but the place and the time are not known. Everyone starts life jou e f o the adle to the g a e . Du i g this jou e , o e o es a oss a a iet of e e ts, incidences, accidents, tragedies, etc. When one grows older and older, his/her working and earning capacity nosedives and thereby he/she would face the financial crunches as the nature does maintain its supremacy in all respects. In other words, when one grows older, his earnings also fall but the expenditures remain the same or even uprooted. Therefore, to support the old age life, one must cut his expenditures except expenditures on essentials and save and invest more when he is apa le of doi g so. He e, the p i iple o se atis o e of the o e tio s of a ou ti g is rightly applicable in our day-to-da life hi h suggests that do ot e pe t u e pe ted i o e but expect the unexpe ted e pe ditu es . I di iduals ought to ake p o isio fo thei old age life when they are physically fit to earn more and more income in order to live happy life in old age without depending much on their children for food, clothes, shelter, etc. In the present scenario of micro family concept, the senior citizens are just waste bodies in the eyes of their children. Rather, A Monthly Double-Blind Peer Reviewed Refereed Open Access International Journal - Included in the International Serial Directories International Journal in Management and Social Science http://www.ijmr.net.in email id- [email protected] Page 267 IJMSS 3. 4. 5. 6. 7. 8. Vol.05 Issue-01, (January, 2017) ISSN: 2321-1784 International Journal in Management and Social Science (Impact Factor- 6.178) the senior citizens are treated as slaves and beggars on the roadside. Thus, the old age life prompts savings and investment in various assets for comfortable old age life. Contingencies: It is e ell k o fa t that the futu e is u k o to us . It is al ead e tio ed in the above para that the life journey of an individual begins from the cradle to the grave. But, the life sees many ups and downs en route to an end. The prediction, forecast, anticipation, etc remain o a pie e of pape i eal life situatio . No e a fo etell hat a happe i o e s life to o o which never comes today. None is free from health hazards. In other words, the health gets affected when a disease strikes which in turn deteriorates in terms of stamina and immune of body. The treatment of hazards like cancer, cardiac arrest, paralysis, diabetes, etc is sometimes not affordable for many families as the cost of treatment of these diseases with advanced amenities is far beyond the reach of a common man. Hence, the unforeseen events as mentioned earlier force an individual to save and invest in financial or physical assets. Steady and regular income: There are various investment avenues namely financial assets and physical assets. The assets for example financial assets fetch fixed and variable returns from time to time. Bank deposits, debentures, post office deposits fetch the fixed returns whereas shares, mutual funds, life insurance policies provide variable returns. One has to decide on whether he needs fixed or variable return from his investment before he chooses an investment avenue. The preference for steady and regular income from an avenue is a decisive factor while selecting the investment options. Thus, the preference for steady and regular income drives the savings to be parked in variety of investment opportunities. Capital appreciation: In case of financial assets, the interest, dividend, bonus, etc are the forms of return from investment in financial assets. On the other hand, the form of return in case of physical assets is generally the capital appreciation i.e. the difference between sales price and purchase price of an asset. Every investment is associated with the risk the quantum of which cannot be judged in advance. The more the return the more is the risk and vice versa. The investment in yellow metal is the most preferred form of investment among the individuals followed by real estate, silver, antiques, etc. However, the liquidity condition of the assets can decide the rate of return on its sale. The law of demand plays very crucial role while buying and selling of any assets. The more the demand the less is the supply but it is the costly affair. Tax benefits: The individuals save and invest out of their earnings in various investment schemes namely variable income and fixed income avenues being offered in money and capital markets. The size of investment and the return thereon vary from one to others. So far as the Income Tax Act, 1961 is concerned, if an individual or an HUF makes contributions to specific investment schemes, up to Rs 1,50,000 is exempted u/s 80C of the said act. In addition, one can also claim exemptions under other section of the act. The tax benefits associated with a particular investment avenue attracts the investors and thereby capital formation also zooms in the country. Thus, tax benefits associated with the investment schemes motivates the savings and investment culture among the households. Life and Health insurance policies: The place and time of death are unknown to anyone but a precautionary measure can be taken to avoid a possible financial burden in case one meets with an accident or losses any organ in an incident that demands money for treatment or cure. The individuals who care for their families and themselves buy insurance policies-life and health that are being offered by enormous companies in the market being tough and competitive. The life insurance and health insurance policies provide a cover to the insured and the benefits are given to the beneficiaries on or before the occurrence of an insured event. Travel abroad: These days, the entire world has become a small village owing to the rapid development of information and technology and all information about foreign countries is A Monthly Double-Blind Peer Reviewed Refereed Open Access International Journal - Included in the International Serial Directories International Journal in Management and Social Science http://www.ijmr.net.in email id- [email protected] Page 268 IJMSS Vol.05 Issue-01, (January, 2017) ISSN: 2321-1784 International Journal in Management and Social Science (Impact Factor- 6.178) available at finger tips as the access to internet is easily made available by using information and technology. Because of easy travel access to various countries, many people fly to other countries of their choice for enjoying holidays at intervals. Therefore, many people save and invest out of their earnings so that they can fly abroad once in their lifetime with the family members. The cost of foreign trip is a costly affair but affordable to many individuals in the post liberalization era. Hence, a foreign trip is believed to encourage individuals to save and invest more and more over a period of time. VII. Analysis of various indicators of savings and investment The savings and investment emerge from certain parameters associated with economic development of a country. The more the growth rate the more are per capita income, gross savings, capital formation, investments, etc. 1. Per capita income in 2015-16: Per capita income is a measure of the amount of money earned per person in a certain area. It can apply to the average per-person income for a city, region or country and is used as a means of evaluating the living conditions and quality of life in both urban and rural areas. It is arrived at by dividing the country's national income by its population. The per capita income in India for the financial year 2015-16 is presented in Table 3. Table 3 Per capita during 2015-16 Sl. Current prices Constant Particulars No (Rs) prices (Rs) 1 Per capita Gross Domestic Product (GDP) 2 Per capita Net National Income (NNI) 105746 88472 93231 77431 Source: Economic Survey of India, 2015-16 Table 3 portrays that the per capita GDP is Rs 1,05,746 at current prices and Rs 88,472 at constant prices. On the other hand, per capita national net income stands at Rs 93,231 and Rs 77,431 at the constant prices. This showcases that the per capita GDP and NNI have shot up. 2. Gross savings as percentage of GDP at current market prices: Gross savings is derived by deducting final consumption-expenditure from gross disposable income and consists of personal savings + business savings + government savings but excludes foreign savings. The figures are presented as a percent of GDP. A negative number indicates that the economy as a whole is spending more income than it produces thus drawing down national wealth i.e. negative savings. Gross savings as percentage of GDP at current market prices is presented in Table 4. Table 4 Gross savings as percentage of GDP at current market prices Sl. No Particulars 2012-13 2013-14 2014-15 2015-16 1 Gross savings 34.60 33.80 33.00 33.00 2 Public sector 1.50 1.40 1.30 1.20 3 Private sector 9.50 10.00 10.80 12.70 A Monthly Double-Blind Peer Reviewed Refereed Open Access International Journal - Included in the International Serial Directories International Journal in Management and Social Science http://www.ijmr.net.in email id- [email protected] Page 269 IJMSS Vol.05 Issue-01, (January, 2017) ISSN: 2321-1784 International Journal in Management and Social Science (Impact Factor- 6.178) 4 Household sector 23.60 22.40 20.90 20.10 4 (i) Physical assets 16.20 15.10 13.20 12.40 4 (ii) Financial assets 7.40 7.30 7.70 7.70 Source: Economic Survey of India, 2015-16 Table 4 reveals that the gross savings have plunged from 34.60% (2012-13) to 33.00% (2015-16) as result of fall in the savings of public sector i.e. from 1.50% (2012-13) to 1.20% (2015-16) and household sector i.e. 23.60% (2012-13) to 20.10% (2015-16). However, the rate of savings of private sector jumped up from 9.50% (2012-13) to 12.70% (2015-16). Such downfall resulted in the fall of the investment in physical assets i.e. from 16.20% (2012-13) to 12.40% (2015-16) but the rate of investment in financial assets has moderately increased from 7.40% (2012-13) to 7.70% (2015-16). 3. Gross fixed capital formation (GFCF) as Percentage of GDP at Current Market Prices: GFCF refers to the net increase in physical assets (investment minus disposals) within the measurement period. It does not account for the consumption (depreciation) of fixed capital and also not include land purchases. It is a component of expenditure approach to calculating GDP. Gross fixed capital formation (GFCF) as percentage of GDP at Current Market Prices is presented in Table 5. Table 5 Gross fixed capital formation (GFCF) as Percentage of GDP at Current Market Prices Sl. No Particulars 2011-12 2012-13 2013-14 2014-15 1 GFCF 34.30 33.40 31.60 30.80 2 Public sector 7.30 7.00 7.10 7.50 3 Private sector 11.30 11.80 11.70 12.30 4 Household sector 15.70 14.60 12.80 11.00 Source: Economic Survey of India, 2015-16 It may be found from Table 5 that GFCF of the householder sector is the highest 15.70%, 14.60% and 12.80% in 2011-12, 2012-13 and 2013-14 respectively but it again nosedived in 2014-15 as compared with the private sector the GFCF of which was the highest i.e. 12.30%. 4. Financial assets of the households: The households (individuals) invest their savings in one or the other investment avenues of their choice from time to time. Some may prefer to invest in bank deposits preferring the safety of principal whereas others may prefer to invest in life insurance considering the unforeseen events and/or contingencies. It all depends on the want for money to come back after some time in future. There are financial assets like currency, bank deposits, life insurance schemes, provident and pension funds, etc. Such assets are selected for investment purpose. Below Table 6 gives the details about various investment avenues under which household savings have been invested. A Monthly Double-Blind Peer Reviewed Refereed Open Access International Journal - Included in the International Serial Directories International Journal in Management and Social Science http://www.ijmr.net.in email id- [email protected] Page 270 IJMSS Sl. No Vol.05 Issue-01, (January, 2017) ISSN: 2321-1784 International Journal in Management and Social Science (Impact Factor- 6.178) Year Table 6 Investment of household sector in financial assets (In Rs billions) Provident NonLife & Bank Shares & Banking Insurance Currency Pension Debentures deposits deposits funds funds 1 201213 1116 5750 172 1820 1240 438 2 201314 1018 7741 305 2052 1362 323 3 201415 1317 5792 274 2347 2008 570 Total financial assets 10244 12792 12356 Source: RBI statistical data as on March 2015 It may be inferred from Table 6 that the financial assets of household sector has jumped up from Rs 10,244 billion (2012-13) to Rs 12,356 billion (2014-15). Among all financial assets, the investment in provident and pension funds has increased by Rs 768 billion i.e. from Rs 1240 billion in 2012-13 to Rs 2008 billion in 2014-15. This indicates that the provident and pension funds are most preferred investment destination among households in India. 5. Financial assets as a percentage (%) of total financial assets: The investment avenues are classified as financial assets and physical assets being offered in the market. The financial assets are more liquid in nature in comparison with those of physical assets. The information pertaining to financial assets as percentage of total assets is displayed in Table 6. Table 6 Financial assets as percentage of total financial assets NonLife Provident Sl. Bank Shares & Total Banking Insurance & Pension Year Currency No deposits Debentures (%) deposits funds funds 1 2012-13 10.90 56.10 1.70 17.80 12.10 4.30 100 2 2013-14 8.00 60.50 2.40 16.00 10.60 2.50 100 3 2014-15 10.70 46.90 2.20 19.00 16.30 4.60 100 Source: RBI statistical data as on March 2015 Table 6 reveals that among all investment avenues, the bank deposits are the most preferred form of investment (i.e. 46.90%) by the household sector during 2014-15 followed by life insurance policies (i.e. 19.00%), provident and pension funds (i.e. 16.30%), currency (i.e. 10.70%) and shares and debentures (i.e. 4.60). The non-banking deposits are the least preferred form of investment with just 2.20%. VIII. Suggestions: The following suggestions are offered to motivate more and more savings and investment in the days to come. A Monthly Double-Blind Peer Reviewed Refereed Open Access International Journal - Included in the International Serial Directories International Journal in Management and Social Science http://www.ijmr.net.in email id- [email protected] Page 271 IJMSS Vol.05 Issue-01, (January, 2017) ISSN: 2321-1784 International Journal in Management and Social Science (Impact Factor- 6.178) 1. Protection of investors’ interest: It is e esse tial that the i esto s o fide e is to e gai ed and retained in the financial market because there are cases of financials frauds and crimes pending against the financial institutions including the banks-public and private sectors. The interest of the investors and depositors ought to be gained and retained as the small and poor investors invest out of their hard earned money. Such investors are much worried of their investments as they do savings and investments axing their expenses and do not enjoy any lavish life. Hence, such poor investors seek the protection their investments. Though, several regulators are trying their level best to curb the financial frauds and crimes by enforcing the stringent laws yet they have failed to execute the same. Therefore, it is sought the interest of the small and poor investors must be gained and retained by passing the stringent laws. 2. More tax benefits: The individual investors prefer to pay less tax on their earnings since it is earned from hand to mouth and save and invest more and more for their future journey of life. If more tax exempted investment schemes are offered to the individuals, such schemes can attract more investors and thereby the more investments can be channelized towards economic activities in the country. Thus, even the higher income group can also enjoy not only more benefit tax but also participate in financial system through such offers. 3. Curbing blade and dabba companies: Many blade and dabba companies are being promoted and many small and scattered investors are being eloped of their hard earned savings as the promoters of such blade and dabba companies deceive and cheat in daylight the investors using one or the other tactics. Hence, the caution must be taken to have close control over the blade and dabba companies to ensure the safety of investments. The companies offering multi layer investment schemes must be apprehended and the searches must be conducted from time to time to unfold the mysterious investment schemes offered by the blade and dabba companies. This measure can bring down the number of cheatings by the blade and dabba companies such as Shardha Chit Funds, Sahara Group, Nagpur Dabba Trading Co, etc a few to name. 4. More financial inclusion: Since National Democratic Alliance (NDA) Government took the charge of the power at the centre, the Modi Government has been putting more efforts to cover mass under the financial inclusion scheme to mobilize more savings and investments. The scheme has received a tremendous response from across the country. There are unreached people at different corners of the country and they are not aware of various facilities offered under the financial inclusion scheme. Hence, it is necessary to outreach such population and bring them under the ambit of financial inclusion scheme. For example, it is learnt that 80% of 240 mn bank accounts under Jan-Dhan Yojana are functional with cash balances. It means that though Jan-Dhan Yojana was launched on large scale basis by the government of India yet the scheme has failed to achieve the given target. Therefore, it is necessary to put more efforts to bring more people under the scheme. 5. Expansion of branches of various financial institutions: There are about 6 lakhs villages in India a d all these illages do t ha e the p ese e of the fi a ial i stitutio s like a ks at thei ati es even after 70 years of independence. In the modern technology era, the people from remote places want to save and invest out of their earnings but due to no access to the financial institutions like banks, they are unable to save and invest their earnings and hence the earnings of people living in places where there are no financial institutions are inconspicuously spent without any productivity. Hence, there is a need to expand the branches of financial institutions in places where they do not have their presence at the moment. 6. Paperless networking: In the technology era, the information required can easily be accessed from any corner and the technology savvy people prefer to have the information about the investment schemes offered and the status of their savings and investments from time to time. Therefore, due A Monthly Double-Blind Peer Reviewed Refereed Open Access International Journal - Included in the International Serial Directories International Journal in Management and Social Science http://www.ijmr.net.in email id- [email protected] Page 272 IJMSS Vol.05 Issue-01, (January, 2017) ISSN: 2321-1784 International Journal in Management and Social Science (Impact Factor- 6.178) to time constraint people prefer to have such information at their finger tips and even to evaluate the performance of their investments. The need of the hour is to digitize all such information relating to savings and investment so that the investors can have the information at their hands and make investment decisions as a hassle free activity. Hence, there is need to digitally provide information through paperless networking. This can boast the savings of the household sector and such savings can be pumped into the economic activities. 7. Dissemination of information: Individuals need to have information pertaining to investment opportunities so often. The information about the new investment avenues, rate of returns, dos a d do t dos, ollate al ualit , et ust e disse i ated to the i di iduals. TV advertisement, wall posters, news papers, FM radios may be used as the means for disseminating such information. Therefore, the institutions offering investment schemes must focus on the rapid dissemination of information at the earliest to garner the attention of prospective investors. 8. Rapport with the investors: Financial institutions offering investment avenues must ensure that they maintain good rapport with their investors and depositors and keep them informed about the performance of their investments and deposits. The financial institutions must also render satisfactory services to their investors and depositors so that they feel attachment with the institutions. Even they may channelize more funds in to the system out of their savings. Hence, the financial institutions need to have a good rapport with their investors and/or depositors. 9. Curbing black money: As many steps like Income Declaration Scheme (IDS) and Demonetization of Rs 500 and Rs 1000 currency notes have been initiated by the Government of India for curbing the black money, other steps namely the investments in some national importance schemes i.e. investment of black money in bonds issued by the government for development of infrastructure facility, national security purpose, education and health, etc may be considered for the purpose. Therefore, the black money may be curbed to a great extent. IX. Conclusion Savings and investments are the key drivers of any economic activities and such savings and investments are to be promoted through various investment schemes and the regulation of such scheme is must as the small and poor investors have become the victims of money laundering, financial frauds and crimes, etc. The safety of investment is to be guaranteed to excel the rate of savings and investments by the household sector in India. Though, there are several regulatory bodies in India financial market to keep a vigil on the fraudsters and money launderers yet such bodies are unable to closely monitor and fix the onus on a particular authority. If more savings and investments of the householder sector are encouraged, there would be huge amount of funds available in the Indian financial system. Such funds can be diverted toward economic development of the country so India can soon become a developed nation with higher standard of living, education to all and health facilities, etc. References i. Athukorala, Prem-Cha d a a d Ku al “e “a i g, I est e t a d G o th i I dia, O fo d University Press, New Delhi. ii. Be Ba k Ma keti g P io ities i U.“ Eu opea Jou al of Ma keti g. iii. Business Standard iv. Datta ‘o houdha , U a I o e Co su ptio a d “a i g i ‘u al a d U a I dia Review of Income and Wealth, Series 14, Number 1, pp. 35-36. v. Do T. Joh so ‘eal Estate I esti g Ma age ial Fi a e Volu e: Issue: . vi. 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A Monthly Double-Blind Peer Reviewed Refereed Open Access International Journal - Included in the International Serial Directories International Journal in Management and Social Science http://www.ijmr.net.in email id- [email protected] Page 274