As a proportion of financial savings by households, shares and debentures accounted for a measly 4.9 per cent in 2005-06. Even so, it’s a big improvement from the 1.1 per cent of household financial savings invested in stocks and bonds a year earlier and a far cry from the nadir of 0.1 per cent reached in 2003-04.

Bank deposits continue to be the favourite place for people to park their funds, and they accounted for almost half of all financial savings of households last fiscal. Dematerialisation, demutualisation, electronic trading, futures and options and a bull run for the last three years hasn’t had much of an effect on households’ appetite for the capital market — in 1991-92, shares and debentures accounted for as much as 23.3 per cent of their financial savings. Even in 1999-00, at the height of the tech boom, investment in shares and debentures was 7.7 per cent of total financial savings.

As a proportion of GDP, household investment in shares and debentures fell from 2.6 per cent in 1991-92 to 0.8 per cent in 2005-06. The Indian household has turned extremely risk-averse and is yet to get over the series of jolts that it suffered in the market scams of the nineties. Nevertheless, equities did gain in popularity last fiscal, with mutual funds driving growth. The share of mutual funds (other than UTI) in household savings rose from 0.4 per cent in 2004-05 to 3.6 per cent last fiscal. That’s pretty high, considering that even in 1999-00, at the height of the IT bubble, mutual funds other than UTI accounted for 3.4 per cent of households’ mutual funds.

If the share of both bank deposits and mutual funds is going up, what is going down?

The data show that the share of provident and pension funds in household savings has been declining. Their share was as high as 22.8 per cent in 1999-00, but it has shrunk to 10 per cent in 2005-06. It’s probable that the unusually high percentage in 1999-00 could be due to the payment of the Fifth Pay Commission arrears, which would have increased provident fund contributions in that year. But even if we exclude 1999-00, the share of provident and pension funds hovered around 16 to 18 per cent in the nineties, which means that the growth of other avenues of investment may have led to a shrinking of the PF share.

Another clear trend thrown up by the data is that the share of insurance funds, particularly life insurance funds, has been going up. In 1990-91, households put 8.5 per cent of their financial savings in life insurance. In 2005-06, that share was 13.5 per cent.

A year earlier, it had been as high as 15.1 per cent. The liberalisation of the sector and the keen competition between the new insurance companies has certainly helped, as has the growing popularity of unit-linked plans, thanks to the stock market boom.

Investments in small savings have also been a major beneficiary, because of the higher-than-market interest rates offered on these products. The share of small savings in household financial investment went up from 4.9 per cent in 1992-93 to 19.5 per cent in 2004-05, before the government brought down administered interest rates on these schemes. As a consequence, the share of small savings in the household basket fell to 12.3 per cent in 2005-06.