Rajesh Shukla: It takes granular data to grasp Indian savings behaviour

Although macroeconomic data from institutions such as the Reserve Bank of India and the ministry of statistics and programme implementation offers national-level estimates of household financial savings, they primarily capture formal instruments like bank deposits, insurance and pension funds. This narrow scope fails to reflect informal savings, which characterize much Indian household behaviour.

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According to the ICE 360° Survey (2023) conducted by People Research on India’s Consumer Economy (PRICE), informal and non-institutional mechanisms such as cash holdings, gold and peer-to-peer lending constitute nearly one-third of total household savings in India. 

These forms of saving are especially prevalent among low- and middle-income households, particularly in rural areas, where income is often irregular, transactions are small and people’s access to formal financial services is limited. Such realities are under-represented in administrative data-sets, which can lead to significant underestimation of both the volume and nature of household savings.

Beyond quantifying savings, the ICE 360° Survey reveals stark structural disparities. The top 20% of the population (Q5) command 46.8% of total household income and hold 45.8% of total savings, underscoring the sharp concentration of financial power in India. 

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In contrast, the bottom 20% (Q1) earn just 6% of income and hold only 5.5% of savings. Further, many households in the lowest income groups spend more than they earn, an indication of negative or zero savings. This financial fragility exposes them to debt traps and limits their ability to recover from shocks like inflation, job losses or medical emergencies.

One of the survey’s most telling insights is that household expenditure is more evenly distributed than income. Core consumption needs—housing, food, education and healthcare—are largely universal across socioeconomic classes. As a result, low-income households are compelled to stretch their limited earnings to meet the same essential needs as wealthier groups, leaving little to no room for savings. This divergence between income and consumption is largely invisible in macro-level financial statistics, but is clearly captured in household surveys.

The middle-income segments (Q3 and Q4) offer a more optimistic picture. Despite earning less than the top quintile, they now contribute nearly 40% of total household savings, which suggests growing financial stability and an emerging capacity to plan for the future. 

For these households, savings are a form of security and long-term investment—primarily directed at low-risk, stable-return instruments such as gold, fixed deposits, the Public Provident Fund, post office deposit schemes and LIC insurance policies. These saving vehicles are chosen not for high returns, but for reliability and safety, aligning with the household financial priorities of protecting family well-being and funding future goals like education and retirement.

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In contrast, higher-income households view savings differently. With essential needs already met, savings serve as a tool for capital optimization and wealth generation. 

These households favour riskier, higher-return investments such as stocks, mutual funds, derivatives and real estate. Backed by surplus income, financial knowledge and access to expert advice, their saving behaviour is characterized by greater diversification and risk appetite. 

This reflects a broader economic principle: As income increases, so does the capacity to take financial risks. These contrasting motivations explain why household-level surveys like ICE 360° are indispensable. Unlike aggregated macroeconomic data, which tends to obscure variation, such surveys provide a granular view of how different income groups save, invest and manage financial stress. They reveal the social dimensions of financial behaviour—such as intergenerational aspirations, regional disparities and varying levels of financial literacy—that are essential for understanding economic inclusion.

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From a policy standpoint, these insights have far-reaching implications.

First, the sharp concentration of income and savings at the top suggests growing inequality, which can hinder both economic dynamism and social mobility.

Second, the lack of savings capacity among the bottom income groups calls for targeted interventions—such as direct benefit transfers, subsidized healthcare and guaranteed employment schemes—to build basic financial resilience.

Finally, the emergence of a financially conscious middle class presents an opportunity to expand access to customized financial products that meet their evolving needs.

Moreover, recognizing informal savings has practical implications for policy design. Financial inclusion efforts must go beyond bank accounts and focus on building trust, improving financial literacy and ensuring that formal savings instruments offer convenience, flexibility and safety—attributes that make informal options so appealing.

To conclude, the ICE 360° Survey (2023) shows that comprehensive household surveys are not just complementary to institutional data, they are essential. They offer a textured, people-centric view of financial life in India, exposing both the potential and constraints that shape saving behaviour across income classes. As India seeks to enhance financial inclusion and economic equity, integrating such bottom-up data into the mainstream policy discourse will help craft strategies that serve the entire spectrum of Indian households and not just the privileged few.

The author is managing director and chief executive officer of People Research on India’s Consumer Economy.