Private saving in India

This article studies the evolution of the private saving rate in India duri ng 1960-95. Its distinctive feature is that it proposes three new measures of private saving, which are incremental improvements to the (naive) nation al accounts measure. The improvements consist of accounting far capital los ses to private net worth due to inflation, including expenditures on durabl e goods as a form of saving, and expanding the definition of saving so incl ude human capital expenditures. After examining descriptive trends and revi ewing the related literature, the article tests the hypothesis that househo lds that save in India "pierce the corporate veil." The evidence shows that , in fact, changes in corporate saving are offset by changes in household s aving, indicating that the unit of analysis should be aggregate private sav ing. The cope analytical section of the article studies how the behavior of the private saving rate is related to the real interest rate, per capita i ncome, the dependency ratio, financial depth, the government saving rate, a nd the share of agriculture in gross domestic product. The empirical analys is is done by estimating error-correction models on aggregate annual data, although most of the discussion centers on long-run effects.