Journal Article

Private Saving in India

Norman Loayza and Rashmi Shankar

in The World Bank Economic Review

Published on behalf of World Bank

Volume 14, issue 3, pages 571-594
Published in print September 2000 | ISSN: 0258-6770
Published online September 2000 | e-ISSN: 1564-698X | DOI:
Private Saving in India

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This article studies the evolution of the private saving rate in India during 1960–95. Its distinctive feature is that it proposes three new measures of private saving, which are incremental improvements to the (naive) national accounts measure. The improvements consist of accounting for capital losses to private net worth due to inflation, including expenditures on durable goods as a form of saving, and expanding the definition of saving to include human capital expenditures. After examining descriptive trends and reviewing the related literature, the article tests the hypothesis that households that save in India “pierce the corporate veil.” The evidence shows that, in fact, changes in corporate saving are offset by changes in household saving, indicating that the unit of analysis should be aggregate private saving. The core analytical section of the article studies how the behavior of the private saving rate is related to the real interest rate, per capita income, the dependency ratio, financial depth, the government saving rate, and the share of agriculture in gross domestic product. The empirical analysis is done by estimating error-correction models on aggregate annual data, although most of the discussion centers on long-run effects.

Journal Article.  0 words. 

Subjects: Development Planning and Policy

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