Independent Research and Policy Advocacy

Household Savings & The Macroeconomy

In this paper, we document some key relationships between micro-level household behavior and macro-level aggregates for the Indian economy. Using the CMIE’s Consumer Pyramids Survey, we show that for the period 2014-19, the household-level savings rate around the median of the income distribution correlates strongly with, and has predictive power for, macro-aggregate variables such as the Wholesale Price Index and its rate of change, the Prime Lending Rate, the growth rate of bank credit for personal loans, the growth rate of industry-sector GDP, and the growth rate of bank credit to the household sector.