India has one of the highest household savings rates in the world. However, the percentage of household savings that emerge as financial savings is tiny, and we witness a preponderance of household wealth allocated in non financial assets. It is evident that a large proportion of Indian households are not using modern finance. And those that are, are not doing it too well.
Investor choices and preferences are a product of many complex and interactive factors. Relative rates of return and risk appetites, while important, are the tip of the iceberg only. Many other factors are also at play in individual financial decisions, such as savings capacities and income levels, an ability to evaluate product choices and performance, confidence in products, service providers and regulators, tax incentives, as well as ease of market access.
In India, research related to retail investor behavior has traditionally focused on the higher income customers in vertical financial market segments. Equal attention is needed regarding the cross market financial behavior of the millions of households at the middle and lower end of the income distribution. Those data that are collected are also generally not focused on issues of direct and immediate interest to business planning, and where business level data are collected they are generally not scalable. In addition, there are no time series data to assist with developing a more informed view of the direction and composition of future retail financial demand.
A 360 degree view of Indian retail financial markets requires a sound empirical foundation of household level data–both at the level of financial policy, financial sector regulation and at the level of business strategy formulation and decision making within financial firms. Without such data, preconceptions and intuition tend to drive financial policy formulation, regulatory responses and financial sector penetration and expansion strategies. Using empirical evidence, it is possible to rationally analyze problems, and move from intuition based policies and business strategies to evidence based policies and business investments.
In an effort to overcome the data gaps in household financial savings behavior, IIMS Dataworks and Invest India Economic Foundation (IIEF) commissioned the Invest India Incomes and Savings Survey 2007 in December 2006. This is the largest ever privately financed survey on individual incomes and financial behavior. The fieldwork for this pan India syndicated survey with a stratified random sample of over one million urban and rural households was commissioned to AC Nielsen and completed in July 2007. This survey has generated a unique integrated database which directly links the incomes, savings, investment portfolios, retirement preparations and outlook, insurance and credit positions, labor market characteristics and demography of over 321 million paid members of the Indian paid workforce as well other individuals with incomes.
