An Econometric Exploration of Indian Saving Behavior

The purpose of the study is to throw some light on the saving behavior of urban Indian households. The nature of the effects on saving of income and net worth and their interactions are examined in detail for different socio-economic sub-groups. There is strong evidence that income and net worth significantly influence the level of saving. Contrary to the studies in advanced countries, home-owners had a much lower saving-income ratio than renters although the former had a slightly higher average income. A major reason for this may be the uncommon-ness of amortized mortgages in India, with no contractual commitment to save. Except for age 65 or over, mean income, saving and the saving-income ratio increased with age up to 45 years and thereafter declined. The age group 65 or over had a higher average income and saved the highest proportion of income. This is perhaps due to the prevalence of joint families in India.