dverse news reports on companies

Availability of domestic capital will reduce Indian economy's dependence on foreign capital. "It will contain the impact and volatility that cash from foreign institutional investors brings in," Shah adds. Experts see this as just the beginning of a longterm shift. "We expect this shift (from physical to financial assets) to realize momentum," says Mahesh Nandurkar, executive , CLSA, a brokerage and investment group. There are both cyclical and structural reasons why Nandurkar says so. But more thereon later. First, here's why the expansion of monetary savings is so critical for the Indian economy.
More Than Just Savings




physical  to financial bodes well economy Sanjay Jain, 46, thought he knew the important estate sector well. Because that is what he had done most of his life. His family is within the construction business. They take up residential projects on contract. And, for the Delhi-based engineer , nuances of the development economy came naturally. Understandably, that's where he invested all his savings. "I thought I had good knowledge of the world ," he says.

From 95% of his savings in land in 2010, 60% is in equity

About six years back, nudged by his financial planner, he started experimenting with equity. Incidentally, just around that point the important estate sector had begun to harm and Jain's bias for equity steadily rose. Today, he's a convert. From 95% of his savings in land in 2010, 60% is in equity. "Real estate has been doing badly. I also realise it's a really opaque and unregulated sector. The equity market in contrast is sort of well regulated, because of Sebi (Securities and Exchange Board of India)," he says. This shift wasn't easy.

Initially, stock exchange volatility bothered him. Adverse news reports on companies would sway the stock exchange overnight and spoil his mood. "With land , you do not get such daily updates," he says. However, over time, he possesses better at handling the swings. And now, albeit the important estate sector bounces back to previous peaks, he's unlikely to return thereto . "Equity is a crucial a part of my portfolio," he says.

Realty, Gold Lose Shine

For India's over $2-trillion economy, such a shift is critical . The greed for gold within the world's largest market is abating. land hungry Indians do a rethink. And what Jain in Delhi is experiencing is now starting to show up in national data, too.

The household savings rate in India has been slowing down over the previous couple of years. More significantly, the buckets during which Indians are salting away their hard-earned money are changing. Breaking a three-year slide, savings in financial assets — bank deposits, stocks, insurance, mutual funds and pension funds — are rising.

After peaking at 12% in 2009-10, financial savings as a percentage of India's gross national income (GNDI) had dipped to a coffee of seven in 2012-13. That trend has now reversed. RBI estimates that the savings in financial assets in 2014-15 moved up to 7.5%. And by all indications, the uptick continues in 2015-16 also (see Household Savings in Financial Assets are once more Rising).
In contrast, savings in physical assets (like land and gold), an old favourite among Indians, are down. From a high of 14.8% in 2011-12 it decreased to 10.4% in 2013-14 (the latest period that government data is available). Even gold demand has been ebbing — from a high of 1,006 tonnes in 2010, it decreased to 842.7 tonnes in 2014, consistent with data from the planet Gold Council. Gold as an investment class is losing shine too. Between January and September 2015, demand for gold as an investment dipped by 10% vis-a-vis the previous year — from 150 tonnes in 2014 to 134.4 tonnes in 2015.

While in numbers the savings shift from physical assets to financial assets may look marginal, there are many reasons why analysts, the govt and economists are giving the trend a warm welcome. "This may be a significant shift," says Rashesh Shah, chairman, Edelweiss Group, a financial services conglomerate. rather than putting money in relatively idle physical assets (land and gold), Indians are now opening up to putting their money in additional productive financial assets.

economy's dependence on foreign capital.

Availability of domestic capital will reduce Indian economy's dependence on foreign capital. "It will contain the impact and volatility that cash from foreign institutional investors brings in," Shah adds. Experts see this as just the beginning of a longterm shift. "We expect this shift (from physical to financial assets) to realize momentum," says Mahesh Nandurkar, executive , CLSA, a brokerage and investment group. There are both cyclical and structural reasons why Nandurkar says so. But more thereon later. First, here's why the expansion of monetary savings is so critical for the Indian economy.
More Than Just Savings
The Economic Survey this year talked about the structural problems within the Indian banking industry . It worried about how high inflation since 2007 had led to negative real interest rates, leading to sharp reduction in household savings. Historically, the Indian economy has leaned heavily on household savings for gross capital formation or, simply put, investment. Household savings have two components — financial and physical. While savings in physical assets are relatively less efficient and not easily available to the banking industry , financial savings are more productive and important for the economy. Hence, a reversal in household financial saving trends may be a welcome progression for the Indian economy.