Two reports should worry all businessmen and industrialists in India.
First is that 47% of Insurance polices have been closed in the last five years. Insurance is something that the middle class subscribes to for safety and security of its future. People who have closed down their insurance polices and withdrawn money from insurance companies have given rising cost as the foremost reason for closing down their policies. The next big reason is the fall in disposable income which they were diverting to paying premiums for their policies. The third reason given is that they have found better investment options which, according to them, will give them better cover for their future.
The net result of this is that the money available with insurance companies, which they invest in share markets and invest in public offering of shares as domestic institutional investors is falling. This will lead to slow down in the share markets over a period of time.
The second report is the fall in savings as a percentage of gross domestic product. As per available data, savings have fallen from 11.5% in FY21 to 5.1 in FY23.
This again indicates that runaway inflation is making people spend in the present and not save for the future. This is bad news for businesses and industrialists. Savings with banks lead to lending of money. Although RBI is always there as the lender of last resort, still savings are a cheaper source of funds for banks. A fall in savings will result in higher interest rates for borrowers and may also lead to higher interest rates for savers. Shortage of savings can affect expansion plans of industries.
The fall in savings rate is the worst in 50 years of recorded history. Yet the government would have us believe that we are in ‘Amrit Kaal’ a period of peace and prosperity.
Real indicators show that our economy is under stress. No matter what the government tells us.
