Miserable is the land that conserves much but does not know how to harness its cache to the fullest. This chronicle could have started on a different note had India, where saving money is a dharma, practised the principle more in observance than in breach. Alas, it remains known for directing much of its household savings to low-yielding deposits disregarding inflation and other red flags.
India’s savings rate, a fairly high score, is the result of tradition. We are a nation of diligent savers. Many of us have customarily set aside a sliver of our earnings for decades. A significant portion of what has been amassed has been invested in land and gold, the latter represented by its most popular form — jewellery. Accumulators abound in our middle classes, the happy hunting ground for bankers and sundry financial institutions.
Despite the extensive use of plastic, a newly-generated appetite for stocks, a surge in fintech-enabled personal loans, and, above all, conspicuous consumption, the common man is still a sucker for tradition. While riskier — potentially more rewarding — avenues are being increasingly explored, the ordinary saver still takes to old-fashioned deposits like a duck takes to water. And thereby hangs a tale. We are yet to administer our savings meaningfully in favour of worthwhile investments. Thus, even though equity allocations are a rage, fixed-income assets overwhelm us although price-hikes render most of these effete.
The trend will not be reversed any time soon. Nevertheless, a breath of fresh air comes in the shape of the figures released by the Reserve Bank of India. The ratio of financial assets to GDP has perceptibly increased over the last year. However, bank and postal deposits collectively account for the biggest chunk of gross assets, followed by mutual funds and direct equity. The latter constitutes just a meagre portion of the aggregate.
That, of course, reflects a lopsided state of affairs and indicates poor judgement. We have, over the years, displayed a rather inexplicable fondness for an orthodox savings regimen. In the process, and at the cost of returns, we have bared our conservative underbelly.
Pundits will sing paeans to our ‘risk-averse nature’. It will be argued that savings must be overseen and assets created in a steady manner. But the average Indian has lost opportunities because of his/her risk-intolerance. And, no, it isn’t an example of dogged discipline. For want of a better word, it is plain silly. At least two generations (taking 1947 as the start) have not saved the way they should have. Countless retirement plans are designed on the basis of ill-conceived strategies, reflected in slowcoach assets. All they provide is a disproportionate sense of security. Returns, the other compelling pursuit, are sacrificed at the altar of habit. No magic, no panacea, awaits such preservers of wealth in their retirement.
This, in fact, is one of the reasons why so many Indian savers have had a dystopic experience. They have striven for years, assembled every penny they could marshal, acquired every administered-rate scheme they could find — and still savings have fallen lamentably short in the winter of their lives. Investment goals have not been reached but the other — inevitable — thing has happened. Lifespans have outdone savings.
Generations must help change the course of this dark narrative. A fundamentally deluded idea must be modified. The time for debate is long over. We should care less about whether the current situation is the result of Nehruvian policies or whether it is triggered by our notorious colonial hangover. We live in interesting, if not inflationary, times — let it all be an opportunity to conserve consciously in favour of enriching assets.
Here is a chance for the nation to seek a more gratifying savings experience. Or else, like a tourist who buys a memento from a native, all we will be left holding is a lame t-shirt. And no change to spare.
Nilanjan Dey is a retirement planning educator