V A Avadhani The average rate of domestic savings at around 10 per cent of national income does not appear to be adequate to sustain a growth rate of 5 per cent. While the basic explanation for the low rate of savings lies in the rising levels of consumption, the slow pace of economic growth is to some extent also due to the existing pattern of asset preferences and utilisation of saving rather than the low level of savings per se.1 THE present pattern of asset preferences is such that the major part of the savings of the household sector is in physical assets and currency holdings. The proportion of its savings held in financial assets, namely, shares and securities of the corporate sector, insurance premiums, provident funds, bank deposits and small savings is hardly 25-30 per cent of household savings (Table 1). The high preference of households for physical assets indicates a pattern of utilisation of savings which may not be entirely conducive to growth, as these purchases could more appropriately be classified as consumption rather than investment expenditure.
