"The best way out is
always through."
—Robert Frost (American,
1874-1963)
Word for the day
Epigrammatic (adj)
Of or like an epigram;
Terse and ingenious in
expression.
Malice towards none
Do headlines about Chawl
dwellers being directors on the board of large jewellery companies, smack of
deep rooted bourgeois mindset?
#Pakorasellers
#MehulChoksi
First random thought this morning
Kamala Hasan (KH) has started his political journey from the house
of Rev. APJ Abdul Kalam.
Before this many have started (or restarted) their public life from
Rajghat, and thoroughly disappointed in their conduct. So much so that a lot of
people have lost faith in the alternative politics.
The dilemma before Tamil voter therefore would be "whether to
give KH a fair chance without prejudice, or stay resigned to the status
quo!"
Household savings - paradigm shift
Recovering from the distraction caused by the latest fraud in the
Indian banking system, I would like to get back to the core issue of paradigm
shift in household finances in the country.
In few earlier posts, I have discussed how the household savings
in India are declining structurally as both the propensity to save and the
capacity to save have declined, especially in past one decade.
The following factors, in particular, might have constricted the
incremental savings potential of households in past couple of decades:
(1) Inadequate job creation
in organized sector
(2) Rise in self employment
needing significant investment
(3) Rise in underemployment
and disguised employment
(4) Rise in the net
incidence of tax on household
(5) Rise in aspirational
discretionary consumption and lower propensity to save
(6) Rise in home and
vehicle ownership
(7) Persistently low (or
negative) real rates
(8) Poor real wage growth
(9) Unremunerative agri
produce prices
(10) Material rise in
household inflation, especially in prices of healthcare, education, energy and
protein.
There is an argument (though not well substantiated) that spread
of financial inclusion and therefore easier access to credit may also be
responsible for lower household propensity to save. Moreover, burgeoning
personal debt means higher debt servicing costs and less savings for
households.
If we consider the following examples of evolving trends in
industrial development, the decline in household savings may seem structural:
- Large scale automation of processes and digitization of transactions;
- Extensive use of artificial intelligence;
- Opening of domestic markets to large global corporations rendering millions of MSME units unviable;
- Improving compliance standards making it tough for millions of units running from unauthorized premises, using informal credit and avoiding regulatory approvals.
One material impact of this change would be a structural rise in cost of
capital in Indian economy and lower spreads for financial institutions who have
so far thrived on the low cost household deposits....to continue
No comments:
Post a Comment