The Hindu Business Line : Urbanites save more than rural folks

Kolkata March 31 In a backdrop marked by little or no awareness about the need for financial protection, 81 per cent of the country's households save, with urban people accounting for a bigger proportion of savings - 88 per cent, compared with rural areas, where 79 per cent of the households save. This forms the crux of a survey conducted by the National Council of Applied Economic Research (NCAER).

Expenditure in urban areas accounts for 62 per cent of income, compared with 56.2 per cent in ruralareas. Salary earners constitute the highest income earners in urban centres, enjoying the highest per capita income.

Chief earners

Nearly 37 per cent of the urban population constitutes chief earners who earn regular salaries/wages. Their share in total income is 45 per cent.

In contrast, people engaged in agri businesses make up the largest group among chief earners. Their contribution to total income is 43 per cent, the survey has established. Also, typically urban, salaried households are the most well-off section.

The survey's sample size stems from 63,016 households (out of a preliminary listed sample of 4.4 lakh households), spread over 1,976 districts and 2,225 urban wards covering 64 NSS regions in 24 States and the Union Territories.

Overall, expenditure patterns between urban and rural households are more or less "similar" - the most obvious difference being expenditure on education.

Expenditure patterns on durables do not differ seriously.

A significant section - one-fourth - of all borrowing households in the country have borrowed money for social occasions. The latter includes births and marriages. Roughly 19 per cent of the borrowing households have taken loans for education-related expenses. About 14 per cent have done so for health-related expenses.

The tendency to borrow from moneylenders is high, 20.7 per cent, in rural households, as opposed to only 7.4 per cent of urban households, the survey said.

A high 30 per cent of rural households "tend to depend on this source" for social expenses, it is pointed out.

Over the past three decades, the savings rate has increased from 15 per cent of GDP (in 1972) to 24 per cent in 2002, NCAER has observed.

Household savings has moved up from 11 per cent to 23 per cent of GDP during the same period.

Indians, however, have the tendency of saving through low-yielding instruments. Bank deposits are typically the most favoured form of saving; more than a third of Indians prefer to keep money at home.

Optimistic

The survey also points out that Indians are "inherently optimistic about their financial security". Nearly 54 per cent of the country's households are confident about financial stability. However, a high 36 per cent have "no idea" how they will find an equivalent in case of loss of the major income source. Further, 34 per cent can not survive on their personal savings in case of such a loss.

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