The economic turbulence and inflationary scenario of 2008-2011 has made Indian households risk-averse.
According to data released by the Reserve Bank of India (RBI) in its annual report for 2010-11, Indian households are dumping equity, and investing more in government-backed savings schemes (public provident funds and post office savings schemes), and hoarding cash.
In 2010-11, Indian households' financial savings grew by a small 5.3 percent to Rs 10,43,977 crore - just about Rs 52,400 crore more than the previous year. And yet, most of the increase went into hoarding cash, which grew 44 percent to Rs 1,39,344 crore, Rs 42,400 crore in absolute terms.
Clearly, Indians seem to like the feel of hard cash to investing in shares or risky assets. Most of their incremental investments went into super-safe avenues.After cash, investments in life insurance funds and deposits with banks and non-banking companies came next in terms of increase.
Among the six major heads of financial savings - currency, deposits, shares and debentures, claims on government, life insurance funds and provident and pension funds - claims on government have grown the most by 58.5 percent to Rs 67,954 crore, driven by a huge jump in small savings schemes.
Small savings like post office deposit schemes, public provident funds, National Savings Certificates and Kisan Vikas Patras took up the lion's share of savings, while government securities attracted less than 1 percent under the "claims on government' head.
Investments in 'shares and debentures' and 'provident and pension funds' however took a beating, as households wound down their investments in mutual funds (with a negative figure possibly reflecting a lack of fresh investments when old ones matured). Investments in direct equities fell.
The total liquidation of investments in the shares and debentures category was to the tune of Rs 4,636 crore. Investments in provident and pension funds also declined by almost 17 percent to Rs 95,159 crore.
By the looks of it, the trend for risk-aversion among households continues in 2011-12 as well, with retail investors staying out of equities, and deposits continuing to show healthy growth.
Updated Date: Dec 20, 2014 05:34 AM