Whenever the savings rate of a society is less than 10 per cent of its disposable income (with stable taxation and inflation), the society is getting into difficulties.
We are becoming a saving society, which is the main driver of the economy. Because of this, the dependence on FDI and FII is significantly lower.
It is at this juncture, we find experts and corporate in India suggesting that the middle-class should consume more. Shopping is made a virtue and a lifestyle statement.
The hidden persuaders (advertising) are in the open. Plastic credit cards are offered for the asking (many times without even asking!) and consuming is made the modern mantra. It is consume or perish which will slowly turn into consume and perish!
The Government is discouraging savings by keeping many a rate low and removing tax breaks for saving.
But the Indian middle-class needs saving much more than anyone else in the world. We do not have universal medical care and, hence, during old age the cost of healthcare has to be borne by the middle-class.
We do not have universal social security. Of more than 400 million workforce in the country, only some 20 million government employees (Central plus State and local governments) and around 40 million private employees (who are covered by Employees Provident Fund — EPF — schemes) have retirement benefits.
Large number of middle-class and poorer segments are not covered by any social security schemes.
The age composition of the elderly, as estimated by the Census office, for different decades is nearly 7 per cent of the population is above 60 years of age.
population projections, says that the population above 60 years is expected to be 7.5 per cent by 2006, reaching 9 per cent by 2016.
This indicates that a substantial portion of elderly need to be taken care of. As per Census 2001, there were more than 403 million total workforce consisting of 311 million rural and 92 million urban workers.
The social security coverage of most of the agricultural and non-industrial workers is inadequate.
This is one area where the policy-planners and society need to focus rather than on consumerism. Their savings can only protect them.
Western economics start with the premise that "Wants are unlimited and resources are limited". Our civilisational ethos is based on "limited wants" in the context of conserving for the future and conserving the nature.
It has cross sectional advantage of nurturing nature and inter-temporal benefit of taking care of elderly and planning for social security in old age.
The greed-based market economy may not offer solutions to the problems of multitude if the focus is only on consumption-driven society.
The fear-based totalitarian systems such as communism have also failed. It is necessary to evolve a third way which is environment-friendly and takes into account intergenerational equity not by the fiat of the State but by the suasion of social norms.
Time to move away from consumption-driven economy to savings nurturing society.
Otherwise, we will prove that the only lesson we learnt from the economic history of the plastic-addicted debt-ridden western society is our refusal to learn any lessons at all.
