By Ashishkumar Chauhan
A few years ago, if someone had mentioned India achieving a $5 trillion economy, it might have been met with skepticism. But here we are, closer than ever to realizing that dream. This remarkable growth story is not just about numbers; it’s a testament to the collective spirit, innovation, and resilience of a nation. The two crucial elements making this happen are savings and capital markets. These are pillars that empower individuals and businesses while driving national progress.
From saving in maida drums at home to engaging in one of the world’s most dynamic capital markets, India’s financial evolution is nothing short of inspiring. Let’s delve into how these two forces are shaping a brighter, more prosperous future for all.
Saving: India’s most timeless and effective habit!
Saving is not just a habit, but it is in the DNA of every Indian and we are proud of it! For decades, families have used savings as a cushion to secure their futures, achieve life goals, and weather the storm when life throws curveballs. India’s gross savings rate stands at an impressive 29.8% of Gross Domestic National Income (GDNI) for 2022-23, with household savings accounting for a lion’s share of 60.9%!
This underscores the pivotal role of families in driving the nation’s financial health. However, today’s savers are exploring beyond conventional methods and there is a noticeable shift towards modern financial instruments.
From small town households to bustling metros, people are embracing everything from mutual funds to insurance plans, and guess what? These aren’t just for the wealthy! Today, anyone can start investing with just Rs500 a month.
The Era of Diversified Savings For a New India
With increased financial literacy and easier access to diverse financial products, embracing new ways to save and invest are becoming the new normal. Mutual funds, pension plans, and insurance products offer higher returns and cater to long-term goals. For instance, systematic investment plans (SIPs) start at just Rs500 a month, making wealth creation accessible to all.
Govt Schemes Driving the Change
Rice and dal is one of India’s favorite dishes, but to make the dal better, you add spices. Similarly, government initiatives have significantly “spiced up” the culture of saving. The Pradhan Mantri Jan Dhan Yojana (PMJDY) has brought banking to over 53 crore beneficiaries, with deposits exceeding Rs2.3 lakh crore. This program not only promotes financial inclusion but also instills a habit of saving among millions. That’s not all, programs like Sukanya Samriddhi Yojana and Public Provident Fund (PPF) incentivize disciplined saving through tax benefits and competitive returns, particularly for underserved populations.
India’s Evolving Demographics
Let’s focus a little on India’s biggest asset, its people! This country’s young and dynamic population is a goldmine for economic growth. By 2031, it has been predicted that the working-age group (15-59 years) will make up 65.2% of the population, which will boost the potential for savings and investments.
Urbanization Says, “Don’t forget us!”
Urbanization is accelerating and it is accelerating at a brisk pace. Currently, 36% of Indians are now living in cities compared to 32% a decade ago. This shift, along with the rise of dual-income households, is driving a culture of saving not just for necessities but also for aspirations like luxury travel, home-ownership, higher education and many more. To boost it further, digital tools and fintech apps are also simplifying financial planning. This is enabling families to dream big and achieve them.
Capital markets: The Wealth Creating Engine
Sure, savings are the providers of financial stability, but do you know who are the catalysts? It is the capital markets! This market fuels businesses, funds infrastructure, and creates jobs by channeling savings into investments. Globally, India’s capital markets are one of the most vibrant. This is not at all surprising as this reflects the aspirations of a nation on the move.
Stock Exchanges Driving Participation
India’s equity markets, represented by the Stock Exchanges, have seen incredible growth. In October 2024, total registered investors on the NSE crossed 10.5 crore! Today, one in five Indian families participates in equity markets, with individual holdings growing tenfold in the last 10 years to Rs114.7 lakh crore in September 2024! When you think about it, these are incredible statistics.
How Mutual Funds Simplify
The bad news is that many people still think investing is for the rich and seasoned pros. But, the good news is that it’s changing fast! All thanks to mutual funds. Mutual funds are democratizing investment. Thanks to platforms like SIPs (Systematic Investment Plans), anyone can start investing with as little as Rs500 a month. No need to know about the ins and outs of the market; these funds pool your money with others and are managed by experts. That means that an average person can invest like a pro.
Debt Markets: A Steady Anchor
These are like the silent killers! This market plays a crucial role in providing low-risk, steady returns. Government bonds, corporate bonds, and treasury bills finance critical infrastructure projects while diversifying investment portfolios.
Innovation with
Alternative Investments & Technology
Let’s not forget the wild world of alternative investments! These days, investors can explore options like real estate, private equity, and even gold bonds, all tailored to different risk appetites and goals. What’s even better? Technology is making these options more accessible to regular investors. The rise of robo-advisors, AI-driven platforms that help you invest smarter, means even those who are new to the game can make informed decisions without spending hours doing research. Digital wallets, UPI, and even blockchain technology are creating seamless, borderless financial ecosystems, enabling people to make transactions and invest in ways that weren’t possible just a few years ago. It’s a whole new financial world and it’s accessible to everyone. Let’s take the easiest of examples! Think about when you pay a petty shopkeeper for a packet of chewing gum via UPI. A voice always emerges to confirm, ‘Received Rsxx.’ Sounds familiar right? It is amazing how technology has made even the smallest transactions effortless and easier.
Sharpening Financial Literacy
Now, here’s a catch: While the tools and opportunities are there, financial literacy in India still needs a little more attention. Many investors lack basic knowledge, leading to impulsive decisions or missed opportunities. Which proves that It’s not enough to just offer people access to savings and investment products, but also highlights the need to educate them on how to use these tools wisely. Targeted education initiatives by regulators like SEBI, banks, and fintech companies are empowering individuals to make informed choices. Workshops, webinars, and interactive tools are helping as well. It’s all about empowering the masses with the knowledge to make informed financial decisions. After all, when people know better, they invest better.
Challenges and the Road Ahead
Just as every revolution faces bumps along the way, India’s financial journey too faces its own set of challenges: market volatility, fraud risks, and digital divide, just to name a few. Not everyone has access to high-speed internet, and not everyone feels comfortable navigating digital tools. But these challenges aren’t roadblocks! They are opportunities. With stronger regulations, better digital infrastructure, and enhanced security measures, these obstacles can be turned into stepping stones, bringing financial empowerment to everyone in the country.
The Final Word:
Savings and capital markets are sides of a coin, they are all about building a future! Savings offer security, while capital markets enable growth. Together, they are building a future where individuals can secure their family’s well-being and invest in their dreams. That way, a nation is rising on the foundation of financial resilience. As India gears up for a $5 trillion economy, savings and capital markets will be the twin engines who will lead the charge. The best part is that the journey is just getting started! Get ready to witness something special.
Conclusion: Empowering a Billion Dreams
Savings and capital markets are more than financial mechanisms. They are keys to unlock dreams!
They allow individuals to secure their futures and also contribute to nation-building. As India gallops towards the $5 trillion economy mission, these pillars will play a pivotal role in shaping an inclusive and sustainable future.
The journey is challenging but exciting. With innovation, inclusivity, and education as guides, India’s financial landscape is definitely poised for unprecedented growth. For every individual and the nation at large, the best is yet to come.
(The writer is MD & CEO, NSE. Views expressed are personal)