Determinants of savings of rural households in Kerala

Abstract

From the classical days, saving has been considered as one of the determinants of growth. In the Indian economy, the household sector contributes the lion’s share of the total savings. In the household sector, rural households have tremendous saving potential which has not been considered seriously by the policy makers and hence, measures have not been chartered to mobilise these huge savings. In Kerala, in spite of low per capita income, the rate of savings is very high. There are various factors influencing the saving behaviour of the rural household sector in Kerala. This paper has tried to identify the factors influencing saving behaviour together with the nature of their influence on saving behaviour. The study is based on primary data collected from one hundred households, selected from three villages in the three regions of the state. The study finds that the propensity to save in the rural household sector is very high. Level of income, income inequalities, value of assets and level of education of the head of the household positively influence savings whereas number of male children, number of earners and dependency ratio has negative influence. Among the occupational groups, households engaged in non-farm sector have higher propensity to save. The number of female children was, believed to have a positive influence on savings, however, in the present sample this factor shows a negative influence. In the era of increasing international financial integration, the high saving potential in the rural household sector should be mobilised by proper policy measures to give stability to the economy. Identification of determinants of savings will help in framing policies accordingly.