In India, most part of saving is generated by the households but bulk of those savings is locked into unproductive physical assets. What are the major implications of this on resource mobilization? While elucidating the government action, put forward your policy suggestions.

In India, around 70% of all the domestic savings is generated by the households. Ironically, most of these savings are locked in unproductive physical assets such as gold, real estate etc. This means that these resources don’t get deployed in growth generating avenues and thus cause a drag on the economy. The main reasons for this include: historically better returns on physical assets (gold/real estate); low development of financial markets; low awareness about financial products; tax evasion and avoidance; lack of transparency in operation of financial assets etc. Further, this issue has some cultural aspects also. Indian public has huge preference to Gold, making the country largest consumer of Gold. 
The government has taken several initiatives to reverse this trend including gold monetisation scheme; sovereign gold bonds; establishment of real estate regulatory authority; promotion of equity linked saving / pension products such as mutual funds and NPS etc. However, the shift from traditional or real assets to financial assets is gradual and slow because its not only about investment but also about traditional biases or the people. 
Policy Suggestions
To reverse the trend, the government should take initiatives towards developing transparent and equitable regulatory framework around financial assets and a faith in economy’s growth potential. First, there should be a Universal Electronic Bank Account (UEBA) for every person above 18 years. Second, there should be ubiquitous access to payment services and deposit products at reasonable charges. Third, there sould be universal access to a range of deposit and investment products at reasaonble charges. Fourth, there should be reasonable access to range of insurance and risk management products at suitable charges. Last but not the least, the low income and middle income households should be legally protected rights pertaining to their financial services.


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