Household Savings - India And US
This is another commentary similar to the other one.
It has been a little over a year since I have lived in US now, and one cannot help but notice the cultural differences in terms of finance between India and US. This seems to put the two countries on opposite ends of scales in terms of savings or more specifically, house hold savings. And some of my recent visits to the bank, resulted in some raised eyebrows at the amount in my checkings/savings account. In my opinion, I am not that very consious about my spending and savings. If my father were to look at my cash flow and balance sheet every month, I am sure to get an earful of scolding and advice. Thus, it roused my interest, and I did a bit of research.
Statistics
A little search, and scan of the public documents provided me with these details.
India is one of the high saving economies of the world. The rate of gross domestic savings (GDS) (i.e., GDS as a percentage of GDP at current market prices) has recorded a steady increase since the 1950s. The savings rate has increased from an average of around 10 per cent in the 1950s to over 23 per cent in the 1990s. It crossed 25 per cent in the mid-1990s and reached its highest level of 29.1 per cent in 2004-05.
RBI Annual Report 2005-06 (PDF) Page 30 | More latest data in RBI Annual Report 2006-07 Page 30-31
According to OCDE measure, the savings percentage of household US has fallen below the zero line in 2005-06.
Reference data: Household Net Saving Rates - XLS | Graph
What Does It Mean
I am no economist. And I am sure the way of mesuring, and the definition for 'household saving' differs between RBI and OCDE. But it is very clear that the household in India puts a major chunk of its income into savings (and investments). Where as, lately, the spending of a US household is more than what it earns. Ouch.
As an aftermath of this, I am now interested in what the ideal savings to income ratio is? Is there some ideal number? Or is it dependant on the person, and the kind of lifestyle?
