Impact of Price Rise on Savings

Gross domestic savings of the household sector increased from Rs. 1832901 crore in 2010-11 to Rs. 2003720 crore in 2011-12 (the latest year for which data on savings are available). However, as a ratio of GDP at current market prices, gross domestic savings of the household sector declined from 23.5 per cent in 2010-11 to 22.3 per cent in 2011-12. High level of inflation might have affected the real rate of return on financial savings.

Several fiscal, administrative and monetary measures have been taken by the Government to control inflation and to raise the real rate of return on financial savings. Some of the specific measures taken to control inflation include: reducing import duties for wheat, onion, pulses and refined edible oils; banning export of edible oils and pulses; imposing stock limits for select essential commodities; maintaining the Central Issue Price for rice and wheat since 2002; suspending futures trading in rice, urad and tur; fixing the Minimum Export Price of onion at USD 1150 per MT; and allocating 195000 tonnes of rice and 327000 tonnes of wheat for distribution to retail consumers under Open Market Sales Scheme (Domestic) for the period upto March 2014. The policy stance and measures in the Second Quarter Review (October 29, 2013) of the Reserve Bank of India are intended to curb mounting inflationary pressures. The decision to launch inflation indexed bonds to protect the savings of the poor and the middle classes from inflation would help households to channelize their savings to financial instruments.

This was stated by Minister of State for Finance, Shri Namo Narain Meena, in written reply to a question in the Lok Sabha today.