Research on rural savings in India

Abstract

Rural savings are determined by both 'ability' and 'incentives' to save. All except two studies reviewed emphasize 'ability', though some qualitatively analyze 'incentives'. This relative neglect is justified when positive substitution effect of the 'incentives' is off-set by its negative income effect. Such 'total' effect does not necessarily arise. 'Incentives' variable can be incorporated in both cross-sectional and time-series models, as shown in the two exceptions. Past time-series estimates of rural savings are characterized by reporting, measurement, and analytical weaknesses. Some of these lead to underestimation of these savings. This, however, does not mean that all of the additional savings are mobilizable by the financial institutions. This is because rural households hold their savings ion monetized as well as non-monetized forms.