Global Trends in Domestic savings and Longevity- Implications for India

Global Trends in Domestic savings and Longevity- Implications for India

Thilak Venkatesan (Bharathiar University, Coimbatore, India) and Venkataraman R (Presidency College, Kolkata, India)
Copyright: © 2019 |Pages: 10
DOI: 10.4018/IJCFA.2019070102

Abstract

Demographic dividend and the lowest median age among the earning population propels consumption and growth in India. Among the emerging economies, China had the leverage for growth through exports until 2008. India benefited by demographic dividend and this translates to providing income and thereby increases savings. On the other hand, the developed countries are experiencing problems of an aging economy, a deflationary scenario, and a pension burden. India, with its major workforce in the unorganized and private sector, needs to recognize the need for forward-looking policies that stimulate savings for a better lifestyle post-retirement. The study was focussed on the relationship between longevity (life expectancy), and domestic savings. The research observed divergence between the developed nations and India. A more futuristic policy action is suggested to motivate savings as the increase in population and higher levels of economic growth can be achieved with more domestic savings.
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Literature Review

Longevity and the rise in the life expectancy across nations of the world have been daunting the policymakers, pension funds, and the insurance companies. Many developed countries have had issues in the recent past of failures towards higher pay-outs to the pensioners. The actual survival age in many developed countries is higher than in most developing countries. The various studies indicate that the savings have also been increasing to meet the consumption post-retirement. Longevity raises the rate of savings and physical capital accumulation. Some countries had initially a higher tax rate due to public education (Zhang, Zhang, & Lee, 2003).

The rising inflation also is a hindrance for the investment companies to deliver returns beating inflation. The various studies in this context have been on aggregate savings level and longevity, the research findings observed that in certain conditions, the hypothesis of the economic theory supports that increase in longevity leads to a higher aggregate saving in steady state (Sheshinski, 2009) & (Bloom, 2002). The holding period of the assets also was longer when classified for permanent income distribution and the findings observed high permanent income people kept large assets until very late in life and proved to counter the rise in medical expenses with age (De Nardi, French, & Jones, 2009). As regards to aging, the requirement for health care was observed for a longer period compared to previous generations (Lindgren, 2016). The improvement in technology for treatments cost involved and modest progress against chronic diseases like cancer would lead to enormous social values (Murphy & Topel, 2005).

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