Mnyl Ncaer Book How India Earns, Spends And Saves

LIFE INSURANCEKaro Zyaada IraadaKa

©The Max New York Life Insurance Limited, 2007

©The National Council of Applied Economic Research, 2007

ISBN: 81-88830-10-0

All rights reserved, no part of this publication may be reproduced, stored in a retrieval system, or

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otherwise, without the prior written permission of the publisher.

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for and on behalf of

The Max New York Life Insurance Limited

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India Financial Protection Survey


STUDY TEAM

Team Leader and Principal Author

Dr Rajesh Shukla

Senior Fellow, NCAER

NCAER Core Research Team

Ms Nitasha Monga

Mr Sandipan Ray

Ms Charu Jain

Mr Anuj Das

Mr M. K Arora

Ms Asha Sharma

Dr Sanjay Kumar Dwivedi

Ms Preeti Kakar

Mr Debraj Sinha

Mr Subrata Bandopadhyay

NCAER Consultants

Dr N S Sastry, Former DG (NSSO and CSO) and Senior Advisor, NCAER, New Delhi

Dr Anil Rai, Senior Scientist, IASRI, New Delhi

Dr Amaresh Dubey, Senior Advisor, NCAER, New Delhi

Ms Adite Chatterjee, Research & Communication Analyst, New Delhi

Members of Advisory Committee

Mr Suman Bery, Director General, NCAER, New Delhi - Chairman

Mr S L Rao, Chairman, Institute for Social and Economic Change, Bangalore

Dr D V S Sastry, Director General, Insurance Regulatory and Development Authority, Hyderabad

Dr Subhasis Gangopadhyay, Director, Indian Development Foundation, Gurgaon

Members of Max New York Life

Mr Debashis Sarkar, Director-Marketing, Product Management & Corporate Affairs

Mr. Abhinav Rahul, Vice President, Corporate Communications


FOREWORD

The Indian economy is growing from strength to strength. The fast-paced economic growth is bringing about a

change in India’s socio-economic fabric. It is creating more jobs, fuelling aspirations and leading consumers to

spend more. It is not uncommon to see Indian households spend beyond their current earning capacities, a

phenomenon that was almost non-existent in the early 1990s.

Easy availability of loans, increasing popularity of credit cards and rising consumerism are putting an increasing

number of Indian households under the risk of being financially vulnerable in the future. The lack of a

comprehensive government-aided social security system only worsens their case.

As a result of rapid urbanisation, rising consumerism and changing lifestyles, the social fabric of the country has also

begun to change. The joint family system is fast giving way to nuclear families. Joint families, by their very nature,

worked around the financial well being and security of each of its members. As this system crumbles, there is a

greater need to work towards making Indian households more financially secure.

All these socio-economic indicators were instrumental in leading Max New York Life to undertake this study,

along with the NCAER. These indicators brought us to the critical question: ‘How financially protected are we?’

As you would be aware, this is the first survey of its kind in the country.

The findings of this report reinforce the fact that a majority of Indian households are financially at risk. The call to

action for the insurance sector is to address this issue and help create a financially secure nation. The first step

towards this larger goal is to spread awareness about financial instruments, such as life insurance.

We at Max New York Life believe that life insurance provides financial protection and long-term wealth creation.

The customised solutions, which Max New York Life provides, are based on the financial needs of Indian families.

We believe that by educating our customers we help them inmaking the right choices to meet their financial goals,

both in the short term and the long term. The findings of this survey will help us in this endeavour.

For Max New York Life, and other insurance companies in the country, the Max New York Life-NCAER India

Financial Protection Survey is a goldmine of data and information that can help us devise better products for

the Indian market.

I hope that this survey proves to be the first step towards building a stronger and more financially secure India.

Gary Bennett,

Managing Director and CEO,

Max New York Life Insurance Co. Ltd.


PREFACE

In 2006-07, the National Council of Applied Economic Research (NCAER) celebrated its Golden Jubilee. Over the

last few decades, NCAER has complemented the work of other official agencies in gathering statistical data on

household income, savings and consumption. And in its 50th year, I am particularly happy that NCAER has

partnered with Max New York Life to bring out this eye-opening study on financial protection in India.

Our partnership with Max New York Life has helped us gather and develop valid data on attitudes and practices

that have a bearing on the financial security of Indian households. The survey is comprehensive – with a sample

size of over 63,000 households spread across the length and breadth of the country.

In India, where social security is virtually non-existent, there is an urgent need to create awareness about

financial protection, amongst both the masses and the classes. While governments have a role to play for the

poor households (such as the public distribution system targeted at below the poverty line or BPL households),

in general financial security largely remains the responsibility of each household.

The findings of the Max New York Life-NCAER India Financial Protection Survey reveal a need to spread awareness

about financial protection in the country.

Our data broadly confirms the fact that Indian households are in the habit of saving out of household income,

and also that they are largely optimistic about their financial security in the future. Yet, for almost a quarter of

households across the income spectrum, their current income is insufficient to meet routine and non-routine

expenditure. This creates the need for a reserve of financial assets for them to fall back upon. At the same time,

their awareness of strategic financial planning is relatively primitive.

Through this survey, we have also been able to gather ample data on the much-talked about rural-urban divide.

The survey brings to fore stark disparities in the earning, saving and spending patterns of rural and urban India.

These statistics can be used by policy-makers and industry to address the vital issue of a more balanced economic

development.

As per the findings of this survey, awareness about life insurance is fairly high amongst Indian households – rich

or poor. Despite this, ownership of life insurance is low. And even amongst households that possess life insurance

policies, the cover is inadequate. Therefore, the market potential for insurance companies like Max New York Life

is tremendous.

This survey has also been able to confirm that life insurance ownership is a function of education and affluence.

And that ownership of life insurance products is largely an urban phenomenon.

As India continues to grow, the need for financial security will only increase. We trust that this survey will assist

both the government and industry to develop more focused campaigns to achieve this important goal.

Suman Bery,

Director General,

NCAER


ACKNOWLEDGEMENTS

The National Council of Applied Economic Research (NCAER) extends its appreciation to Max New York Life forentrusting NCAER to undertake the India Financial Protection Survey.

The Advisory Committee — chaired by Mr. Suman Bery and consisting of members Mr S L Rao, Chairman,Institute for Social and Economic Change, Bangalore; Dr D V S Sastry, Director General, Insurance Regulatory andDevelopment Authority, Hyderabad and Dr Subhasis Gangopadhyay — extended its guidance and supportthroughout the study. We acknowledge the committee's generous contribution of time, effort and expertiseunder the most stringent of schedules.

Several researchers and policymakers helped NCAER's research team in its efforts to undertake this study.We extend our appreciation and gratitude to NCAER Advisors and Consultants Dr N S Sastry, Former DG (NSSOand CSO) and Senior Advisor—NCAER, Dr Amaresh Dubey, Senior Advisor, NCAER, Dr Anil Rai, Senior Scientist,IASRI and Ms Adite Chatterjee, Research & Communication Analyst, for their useful technical inputs and guidancethat enriched this study.

The NCAER research team deserves a special mention, for all its efforts to go through reams of data andstatistics in order to come out with incisive analysis. The NCAER field staff and State Networking Agencies andNCAER support staff worked overtime to collect data from all across the country. This study would not havebeen possible without their efforts.

Max New York Life team particularly Debashis and Abhinav provided the NCAER team with the right support andinputs, which helped us come out with some stark findings in this report. We also acknowledge the efforts ofGenesis Burson- Marsteller team in helping it get the right coverage in the national and regional media.


TABLE OF CONTENTS

Page No.

List of Tables 1

List of Figures 2

Executive Summary 5

Chapter 1 Introduction 11

1.1 Background 11

1.2 About the survey 12

1.3 Importance of the survey 12

1.4 Plan of the Report 13

Chapter 2 How India Earns 17

2.1 Income Expenditure Profile 18

2.2 Income by Occupation 18

2.3 Income by Age-group 20

2.4 Rural-Urban Divide 21

2.5 Impact of Education 21

2.6 Disparity by Categories of Landholding 23

2.7 Regional Disparity 24

2.8 Disparity by the Size of Town 25

2.9 Disparity in Select Cities 27

Chapter 3 How India Spends 31

3.1 Expenditure Pattern by Occupation 32

3.2 Expenditure Profile by Education Level 33

3.3 Expenditure Pattern by Categories of Landholding 35

3.4 Impact of Income 36

3.5 Regional Expenditure Profile 37

3.6 Expenditure Pattern by the Size of Town 38

3.7 Ownership of Consumer Durables 39


TABLE OF CONTENTS

Chapter 4 How India Saves 43

4.1 Savings Pattern of Indian Households 43

4.2 Why do Indians Save? 47

4.3 Preferred Mode of Saving 48

4.4 Savings Related Household Behaviour 50

4.5 Coping with Trauma 51

4.6 Households’ Perceptions About Financial Security 51

Chapter 5 Life Insurance 57

5.1 Awareness About Life Insurance 57

5.2 Ownership Pattern of Life Insurance 59

5.3 Value of Life Insurance and Premium Paid 60

5.4 Socio-Economic Profile of Insured Vs Uninsured Households 64

5.4.1 Demographic Profile 64

5.4.2 Economic Profile 65

5.4.3 Ownership of Select Consumer Durables 67

5.5 Savings Related Behaviour of Insured Households 67

5.5.1 Why do Insured Households Save? 67

5.5.2 Where do Insured Households Prefer to Save? 68

5.5.3 Ownership of Account in Financial Institution and 69

Outstanding Loan

5.5.4 Managing Economic Hardship 69

5.6 Insured Households’ Perception of Financial Security 69

5.6.1 Confidence in Stability of Source of Income 69

5.6.2 Time to Recover 70

5.6.3 Sustainability on Current Savings 70

Chapter 6 Way Forward 72

Annexure I Survey Methodology 79

1India Financial Protection Survey

LIST OF TABLES

Table No. Title Page No.

Chapter 1 Introduction

1.1 Estimates of standard errors 15

Chapter 2 How India Earns

2.1 Estimates of households and population 17

2.2 Earnings by education level of chief earner 22

2.3 Household profile by size of landholding 23

2.4 Distribution of households by level of education of chief earner 23and suze of land holding

2.5 Distribution of households by source of income 24and size of land holding

2.6 Profile of households in different categories of states 24

2.7 Profile of households by size of town 25

2.8 Earnings by size of town and level of education of chief earner 26

2.9 Earnings by size of town and major source of income 26

2.10 Profile of households in select cities 28

2.11 Income distribution by per capita income quintiles 29

2.12 Estimates of income inequality 29

Chapter 3 How India Spends

3.1 Estimates of financial vulnerability 41

Chapter 4 How India Saves

4.1 Measures taken to overcome economic shock 51

Chapter 5 Life Insurance

5.1 Value of insurance by location 61

5.2 Value of insurance by major source of household income 61

5.3 Value of insurance by level of education of chief earner 62

5.4 Value of insurance by age of chief earner 62

5.5 Value of insurance by size of landholding 63

5.6 Value of insurance by level of income 63

2 India Financial Protection Survey

LIST OF FIGURES

Figure No. Title Page No.

Chapter 1 Introduction

1.1 Distribution of household by socio-religious groups 14

Chapter 2 How India Earns

2.1 Estimates of income and expenditure 18

2.2 Distribution of households by major source of household income 18

2.3 Share of population and income by occupation of chief earner – Urban 19

2.4 Share of population and income by occupation of chief earner – Rural 19

2.5 Share of population and income by occupation of chief earner – All India 19

2.6 Share of population and income by age of chief earner – Urban 20

2.7 Share of population and income by age of chief earner – Rural 20

2.8 Distribution of households and income by major source of household income 21

2.9 Earnings by level of education for salaried households – All India 22

2.10 Distribution of households by landholding 23

2.11 Distribution of households across state categories – All India 24

2.12 Distribution of households across income quintiles – All India 25

2.13 Earnings of graduate households in select cities 26

2.14 Earnings of salaried and business households in selected cities 27

2.15 Distribution of household by highest literacy 30

2.16 Distribution of household by major source of income 30

2.17 Ownership of selected consumer goods 30

Chapter 3 How India Spends

3.1 Estimates of routine and non-routine expenditure 31

3.2 Distribution of routine expenditure 32

3.3 Distribution of unusual expenditure 32

3.4 Estimates of routine and non-routine expenditure by major source of income 32

3.5 Distribution of routine expenditure by major source of income 33

3.6 Distribution of non-routine expenditure by major source of income 33

3.7 Estimates of routine and non-routine expenditure by education level of chief earner 34

3.8 Distribution of routine expenditure by education level of chief earner 34

3.9 Distribution of non-routine expenditure by education level of chief earner 34

3.10 Estimates of routine and unusual expenditure by landholding 35


LIST OF FIGURES


3.11 Distribution of routine expenditure by landholding 35

3.12 Distribution of non-routine expenditure by landholding 35

3.13 Estimates of routine and non-routine expenditure by income quintiles 36

3.14 Distribution of routine expenditure by income quintiles 36

3.15 Distribution of non-routine expenditure by income quintiles 37

3.16 Estimates of routine and non-routine expenditure by categories of states 37

3.17 Distribution of routine expenditure by categories of states 38

3.18 Distribution of non-routine expenditure by categories of states 38

3.19 Estimates of routine and non-routine expenditure by size of town 39

3.20 Distribution of routine expenditure by size of town 39

3.21 Distribution of non-routine expenditure by size of town 39

3.22 Ownership of consumer durable 40

3.23 Estimates of income and expenditure 41

3.24 Distribution of households – Vulnerable versus non-vulnerable 42

3.25 Ownership of selected consumer goods – Vulnerable versus non-vulnerable 42

Chapter 4 How India Saves

4.1 Estimates of surplus income, investment and savings 43

4.2 Estimates of surplus income, investment and savings 44

by occupation of chief earner

4.3 Saving habits of Indian households by education level of chief earner 44

4.4 Saving habits of households by age of chief earner 45

4.5 Saving habits of households by categories of landholding 46

4.6 Saving habits of households by categories of states 46

4.7 Saving habits of households by size of town 47

4.8 Motivation to save for future 47

4.9 Preferred forms of saving 48

4.10 Preferred forms of saving – banks versus keeping at home 49

4.11 Ownership of an account in financial institutions 50

4.12 Loan outstanding 50

4.13 Confidence in stability in household income 52

4.14 Time to recover in case of loss of income source 53

4.15 Sustainability on current savings 54

LIST OF FIGURES


4.16 Distribution of households by major source of income 56

4.17 Distribution of households by level of education of chief earner 57

4.18 Estimates of income, expenditure and surplus income 58

4.19 Size of investment 59

Chapter 5 Life Insurance

5.1 Awareness about life insurance 60

5.2 Awareness about life insurance across income levels - rural versus urban 60

5.3 Ownership of life insurance 61

5.4 Ownership of life insurance across income quintiles - rural versus urban 62

5.5 Major source of household income of insured versus uninsured 63

5.6 Education level - insured versus uninsured 64

5.7 Age profile - insured versus uninsured 66

5.8 Marital status - insured versus uninsured 67

5.9 Gender - insured versus uninsured 67

5.10 Estimates of income, expenditure and surplus income - 67

insured versus uninsured households

5.11 Estimates of routine and non-routine expenditure - 68


5.12 Distribution of routine expenditure - insured versus uninsured households 68

5.13 Distribution of non-routine expenditure - insured versus uninsured households 68

5.14 Saving habits - insured versus uninsured households 68

5.15 Investment profile - insured versus uninsured 69

5.16 Ownership of select consumer durable goods - 69


5.17 Motivation to save - insured versus uninsured households 70

5.18 Preferred form of saving - insured versus uninsured households 70

5.19 Account in financial institution and loan outstanding 70

5.20 Measures taken to overcome death of chief earner 71

5.21 Measures taken to overcome major sickness of any household member 71

5.22 Confidence about the stability in major income source 71

5.23 Time to recover in case of loss of income source 72

5.24 Sustainability on current savings 72

India Financial Protection Survey4


EXECUTIVE SUMMARY

The Indian economy has been growing at a healthy

rate of over 8 per cent for the last four financial years.

But has the economic growth rate made Indians more

financially secure? Are Indian households now earning,

spending and saving more? And do they undertake

financial planning of any kind to secure their future?

The Max New York Life-NCAER India Financial

Protection Survey was initiated to seek answers to

these very vital questions.

A financially secure country cannot be built on the

base of a small population of financially secure

households. If we, as individuals, are financially well-

protected, our nation will emerge stronger financially.

Max New York Life, one of India’s leading life insurance

companies, and the country’s reputed policy research

organisation, the National Council of Applied Economic

Research (NCAER), got together to undertake an all-

India household survey to determine the financial

security and well-being of Indian households and to

generate a risk profile of Indians across socio-

economic groups. By definition, financial risk is

essentially an assessment of earnings, spending and

saving patterns of households and the financial

products they invest in order to protect themselves

against financial risks.

Given the absence of a robust, state-supported social

security programme in India, one of the objectives of

the study was to understand the significance and

potential of life insurance as a

risk-mitigating tool for Indian households.

A probability sample comprising of 63,016 households,

out of a preliminary listed sample of 440,000

households, spread over 1,976 villages (250 districts)

and 2,255 urban wards (342 towns) covering 64 NSS

regions in 24 states/UTs was interviewed while

executing the survey.

To increase accuracy and ensure adequate item

response, the survey was conducted by holding face-

to-face interviews of heads, as well as members, of

these sampled households with the help of a

questionnaire. Non-response and non-sampling error

were reduced by conducting focused group

discussions, proper training of interviewers and

supervision.

Some of the important indicators and estimates in this

study are fairly comparable with those of other reliable

data sources such as NSS 61st Round, Census 2001 and

National Accounts sources. Above all, a group of

eminent economists and statisticians were associated

as members of the Advisory Committee and as

advisors throughout the study and the findings of the

study have been endorsed by them.

Some of the key (chapter-wise) findings are as follows:

How India Earns

There were 205.9 million households in the country in

2004-05, of which 30 per cent (61.4 million) lived in

urban areas and the rest (144.5 million) in rural areas.

The average household in India has an annual income

of Rs 65,041 and an expenditure of Rs 48,902, leaving

it with a surplus of Rs 16,139 to save and invest.

Urban income levels are around 85 per cent higher

than rural ones (Rs 95,827 per annum versus Rs

51,922 per annum). Given the fact that expenses of

urban households are also substantially higher (at Rs

69,065 per annum) than rural ones (Rs 40,309 per

annum), an average urban household saves nearly

double that of a rural household (Rs 26,762 per

annum in urban areas versus Rs 11,613 for rural

areas).


Incomes of Indian households are a function of factors

like occupation, education and landholdings. For

instance, in rural areas, households headed by

labourers account for 34.6 per cent of the rural

households, but only 20.2 per cent of rural income; in

urban areas, the corresponding figures are 22.9 per

cent and 9.7 per cent respectively. At the all-India

level, the labour class has the largest difference

between the share of such households in the total

population (31.2 per cent) and the share in total

income (15.6 per cent).

Incomes tend to increase with age. At the all-India level,

average household incomes rise from Rs 47,192 per

annum in the case of households where the chief

earner is below 25 years old to Rs 55,663 in the 26-35

year age group, to Rs 85,841 per annum for households

where the chief earner is above 66 years old.

Not surprisingly, education makes a big difference to

earning levels. Salary levels range from Rs 37,574 per

annum for illiterate households to Rs 131,104 (that is,

3.5 times that of lowest level) for graduate

households. For each level of education, salary levels in

urban areas are higher as compared to rural areas.

Similarly, the land possessed also determines earning

levels. For instance, households that do not own any

cultivable land form 37.3 per cent of the population,

but their share in rural income is 30.7 per cent. In

contrast, large farmers account for just 4.7 per cent of

the rural population and they contribute about 9 per

cent to rural income.

India also has large regional disparities in income. In Delhi,

which is the richest state in the country, the average per

capita income per annum is Rs 29,137. In comparison,

the average per capita income per annum in the case of

Bihar, India’s poorest state, is only Rs 6,277. If the various

states are bunched into three categories of low, middle

and high income (based on the level of their per capita

income), youwill find that nearly 67 per cent households

in the lowest income quintile (Q1) are residing in the low-

income states; 20.8 per cent in middle-income and just

12.3 per cent in high-income states.

Labourers constitute the largest segment of poor

households and comprise over 62 per cent of such

households. In contrast, this group accounts for 26 per

cent of the non-poor households. Those earning

salaries account for 21.7 per cent of non-poor

households whereas just about 4.4 per cent of poor

households earn their living through salary/wages.

How India Spends

Apart from the large differences in urban and rural

income, there is a big difference in the manner in

which income is spent. The average Indian household

spends about three-fourth of its income on routine

and non-routine expenditure.

The rural-urban divide is also evident in the spending

patterns of households. While rural households spend

(on an average) Rs 18,404 on food items in a year,

urban households’ spend level on food items is

Rs 26,858. As a proportion of income, urban

households spend around 45 per cent of their income

on food while rural ones spend around 55 per cent.

Not surprisingly, expenses on items like food tend to

drop (as a share of both income and expenses) as

households get richer. Food expenses, which comprise

51.1 per cent of all routine expenditure at the all-India

level, rise to 59 per cent in the case of households

headed by illiterates. This falls to 43 per cent in the

case of households headed by graduates.

Similarly, there a large difference in the proportions

spent on housing (5.9 per cent in urban areas versus

3.8 per cent in rural areas) and on education (8.7 per

cent versus 6.4 per cent). But expenses in other areas

like health (4.7 per cent versus 4.6 per cent), clothing

(7.1 versus 6.8 per cent) and buying durables (4.9

versus 5 per cent) are not too dissimilar.


Like earnings, expenditure patterns too are a function

of age, occupation, education, landholdings and

location. Households whose main source of income is

salaries/wages have the highest annual income as well

as the highest annual consumption expenditure. They

spend more on non-food items (Rs 33,560 or 55 per

cent) than on food items (Rs 27,975 or 45 per cent).

Weddings, social ceremonies and medical expenses

largely make up for the unusual expenditure of

households. While unusual expenditures account for

around 13.6 per cent of income in rural areas, the

figure is marginally lower at 10.6 per cent in urban

areas. For the country as a whole, it is 12.2 per cent.

Not surprisingly, the urban-rural disparity is also

reflected in the ownership profile of most consumer

durables. For instance, in the lower category of

durables like pressure cookers and ceiling fans, urban

ownership levels are much higher than those for rural

areas. Just 38 per cent of rural households, for instance,

own a pressure cooker/pan as compared with 80.4 per

cent for urban areas. Among the medium category of

consumer durables (such as black-and-white TV sets,

geysers, vacuum cleaners and mixer-grinders),

penetration levels are even lower -- just 35 per cent of

all households in India have mixer-grinders, with more

urban homes (56 per cent) compared to rural homes

(19 per cent) owning these gadgets.

Ownership of high-end consumer products is even

limited. However, for certain products, the share is

growing. Regular colour TVs, for instance, have

penetrated a third of Indian homes, with ownership

being significantly higher in urban households - at

54 per cent.

The survey found one-fourth of Indian families (51

million households equivalent to about 262 million

persons) to be financially vulnerable. In other words,

incomes of around 25 per cent of Indian households are

below their total expenditure and these households are

unable to meet their needs through the financial

resources at their disposal. Approximately three-fourth

of such households is located in rural India.

How India Saves

Due to the lack of a social security system, over 80 per

cent of Indians save. However, less than a fourth of

these savings finds its way into financial instruments .

While two thirds of all savings are kept in the form of

liquid assets – in cash, in the bank and in post office

deposits – around a fifth of all investments are in the

form of premium on insurance policies, as compared

to just 7 per cent in the case of shares/debentures.

As with earnings and spends, savings patterns too are

a function of factors like age, education, location and

landholdings. The survey found the salaried to be the

biggest savers. Salaried employees comprise just 18

per cent of households in the country, but they have

the highest levels of income (Rs 108,620 per annum)

and the highest levels of savings from it (33 per cent).

Indian households have different reasons for keeping

some money as savings – ranging from emergencies

to marriages and social events, children’s education

and gifting. Saving for emergencies emerges as the

top-most priority for Indian households with 83 per

cent households saving for this purpose. Children’s

education is another key priority – almost 81 per cent

households save for this need.

Nearly 69 per cent households in India save for reasons

of old age financial security whereas 63 per cent

households save to meet future expenses towards

marriages, births and other social ceremonies. Nearly

47 per cent households save to buy or build a house

and a similar percentage is saving to improve or

enlarge their business.

Weddings, births, social events and ceremonies have

a special place in the lives of Indian families. Not

surprisingly, 63 per cent of households save for social

ceremonies with 64 per cent of rural households


saving specifically for this reason versus 60 per cent of

urban households. The percentage of households

saving to buy a house is slightly higher in urban India

(51 per cent) compared to rural India (45 per cent).

A key finding of the survey was the fact that 36 per

cent of households in the country prefer to keep their

savings at home. More than half of Indian households

(51 per cent) prefer to save by keeping their savings in

bank deposits. Households opting for post-office

deposits account for just 5 per cent. Cooperative

society deposits, chit funds, bonds are some of the

other modes of saving. Only 2 per cent households opt

for purchasing insurance policies.

Households in the lower income quintiles and more so

in rural areas, have the highest tendency to save their

money in the form of cash. So, 58 per cent households

in the bottom-most income quintile (Q1) keep their

savings at home in the form of cash (30.5 per cent put

it in the bank and another 5 per cent in post office

accounts) and this falls to 20.3 per cent in the case of

the top-most income quintile (and rises to 68.1 per

cent households putting their money in banks and

around 3.0 per cent in the post office).

When hardships fall on Indian households (such as the

death of the chief earner, or a major illness in the

family), most households draw down on personal

savings. The urban-rural split: 58 per cent urban

households and 54 per cent rural households took

recourse to personal savings in the event of a financial

hardship. Almost a fourth of all Indian households

opted for a loan from a friend or a relative to tide over

the financial crunch.

The main reason why Indians tend to save for

emergencies (and not for their old age) is the fact that,

by and large, they are quite confident of their ability to

live off their savings after retirement, and to be able to

find another job within months of losing the current

one. The study clearly brings out that India is a country

of optimists when it comes to financial security. More

than half the Indian households (54 per cent) are

confident about their current and future stability.

Unfortunately, the survey highlights that this financial

optimism is not based on facts. An overwhelming 96

per cent of households feel that they cannot survive

for more than one year on their current savings in case

they lose their major source of household income and

yet 54 per cent households feel that they are

financially secure. Financially at risk urban Indians

appear to be even more optimistic than their rural

counterparts. This clearly indicates that Indians do not

take a long-term view of their financial security and

hence their optimism is misplaced and there is a

pressing need for financial literacy for better

understanding of their financial risks.

At the all-India level, investment in financial

instruments – such as small savings, stocks and

insurance – accounts for about 3 per cent of the

estimated household income. Of these, investment in

stock market and small savings account for 0.5 per

cent each but for life insurance, the corresponding

figure is higher - at around 2 per cent. If we consider

the sub-set of households that invest in these financial

instruments, the proportion of such investments to

their household income is significantly higher. For

instance, investors in the stock market invest about 22

per cent of their household income compared to 14

per cent in the case of small savings and 4 per cent for

life insurance.

Life Insurance

Awareness about insurance is quite high in India.

Around 78 per cent households are aware of insurance

products. Despite this, ownership of insurance

products is low - only 24 per cent households in the

country own a life insurance cover.

At the all-India level, for all households, while the

average sum assured of a life insurance policy in the


country is Rs 27,951, the average premium paid is

Rs 1,227 and this represents 4 per cent of the

household disposable income. If, however, the insured

households alone are considered, their average

premium payments work out to Rs 5,007, with the

sum assured of Rs 114,450.

Urban India is more aware of life insurance – 90 per cent

of urban households are aware of life insurance, as

opposed to 73 per cent rural households. Life insurance

awareness is also a function factors like occupation,

age, education and size of the landholdings. The salaried

class is most aware about insurance. Nearly 95 per cent

salaried households are aware about insurance

compared to 89 per cent households that are engaged

in non-agricultural self-employed work followed by

agricultural households (77 per cent) and labour

households (63 per cent).

Awareness about life insurance increases with age.

Households with chief earners in age groups of 46-55

years, 56-65 years and 65+ years are more aware (81

per cent each) about insurance than the younger age

groups. Similarly, households that have larger

landholdings are more aware of insurance than those

with relatively smaller landholdings or the landless:

only 66 per cent of households among the landless and

72 per cent among marginal farmers (0.1-2 acres) are

aware of insurance. Percentages rise to 86 per cent and

87 per cent among farmers with medium (4-10 acres of

land) and large (10-plus acres) landholding respectively.

Awareness of insurance is largely linked to income

levels. Nearly 90 per cent of the top income quintile

group (Q5) and 81 per cent in the 60-80 per cent

income quintile group (Q4) in rural India are aware of

insurance products.

To an average Indian, life insurance is the most

important form of insurance. At the all-India level,

about 86 per cent of households aware about the

insurance considered life insurance as the most

important product among all insurance products such

as health (6 per cent), crop (3 per cent) and

automobile (5 per cent) insurance.

Like awareness, ownership of life insurance products

too is a function of factors like education, age,

landholdings and income. Households that buy life

insurance tend to be more prosperous, more educated,

and ownmore consumer durables than those that don’t

buy insurance. For instance, nearly 58 per cent

households with chief earners who are graduates (or

more educated than that) own life insurance against

just 13 per cent and 9 per cent in the case of primary-

educated and illiterate households. And 26 per cent of

households that have chief earners who have studied

up to the higher secondary level are insured.

The ratio of premium payments to income indicates

that the insured household is currently utilising about

4.4 per cent of disposable income towards insurance

payment as against about 1.9 per cent of income for

the entire household sector. The average sum assured

of policies in urban insured households is higher - at

Rs 132,249 - with a premium of Rs 6,634 compared to

Rs 98,899 with premium of Rs 3,560 for their rural

counterparts.

Of the insured population, an overwhelming majority –

86 per cent – comprises of males. Only 14 per cent of

the insured are females. A similar analysis of the

uninsured population reveals that nearly 52 per cent of

the uninsured are males and 48 per cent are females.

The main reason why insured households save for

emergencies and not for their old age is the fact that,

by and large, they feel quite secure about their ability

to live off their savings after retirement, and to be able

to find another job within months of losing the current

one. At the all-India level, 23.2 per cent of insured

households said they were very confident about the

stability of their household income, and another 51 per

cent said they were confident.


An indicator of the kind of financial planning most

households undertake is the time they believe it will

take to recover from a loss of income compared to

their level of confidence about the stability of their

incomes. So, 35 per cent of insured households believe

it will take them less than six months to be able to

replace their current incomes in case of a disruption.

More uninsured households are unsure of the time

frame by which they would be able to find alternative

income (38 per cent) compared to insured households

(30 per cent). More insured households claim they

would be able to find alternative income (26 per cent)

within a year, compared to those who do not own

insurance (19 per cent).

The study clearly indicates that there is a definite

scope for increasing the volume of savings in life

insurance even at the existing levels of income, given

its distribution and the employment structure. For

instance, there are 11 million rural and 10 million

urban households that could be a lucrative target for

life insurance marketers. These segments are aware of

life insurance and are confident about their financial

security, but are not insured. They earn more than the

median income of the insured households. In

monetary terms, taking the current premium amount

of Rs 5,007 per household into account, the immediate

market opportunity for life insurance works out to

around Rs 105 billion. This humungous opportunity can

be captured by insurance industry players through

their existing marketing strategies.


CHAPTER 1INTRODUCTION

1.1 Background

Financial risk management is a new conceptual

framework that views financial protection as a set of

measures that support individuals and households to

manage financial risks. It includes three strategies to

deal with risk (prevention, mitigation and coping),

three levels of formality of risk management (informal,

market-based and public) and many actors (individuals,

households, communities, NGOs, governments at

various levels and international organizations) against

the background of asymmetric information and

different types of risk. This view of social protection

emphasises the double role of risk management

instruments— protecting basic livelihood as well as

promoting risk taking.

In most developed countries, governments provide

financial benefits to citizens who are eligible on grounds

of unemployment, sickness, old age, disability etc

through government-aided social security programmes.

The situation in developing countries like India is very

different. Here, unemployment insurance is unheard of

and state pension barely covers a small fraction of the

Indian public. Healthcare is often thinly or sporadically

provided, education is typically limited to primary school,

and assistance to the infirm and disabled is usually

negligible. The sheer size of population and the acute

resource constraintsmake it difficult for governments to

provide robust social security programmes.

Since India is the largest democracy in the world with

enormous socio-economic and cultural diversity, the

limited capacity of some households to protect

themselves against contingencies (that threaten to lower

their living standards) tends to be the primary factor that

determines their levels of investments, their ability to

take advantage of economic and social opportunities for

their financial advancement. There is not much

awareness about the need for financial protection, and

most life insurance policies are regarded as a tax-saving

tool or even a pure investment. Only a minuscule

percentage of the population, particularly salary earners

and businessmen, own life insurance. There is a large

segment of people – including businessmen,

professionals, farmers, artisans and others – who remain

“financially unprotected” and outside the purview of any

form of financial protection. Even those who own life

insurance policies are generally under-protected.

In the backdrop of these harsh realities, how financially

secure are Indians? How many Indians can cope up

with a financial disaster and sustain themselves for a

year through their current savings? How many Indian

families are at a financial risk if they lose their primary

breadwinner? Unfortunately, no systematic and

comprehensive empirical assessment of such efforts

has been made in the Indian context. An important

factor contributing to this is the paucity of reliable

data (that is accessible and timely).

To determine the answers to these and many more

questions on the financial health of Indian households, in

June 2005, Max New York Life Insurance Co. Ltd. and

National Council of Applied Economic Research (NCAER)

undertook a comprehensive household survey called

“India Financial Protection Survey”. This survey was

concluded concurently with the “National Survey of

Household Income and Expenditure” which covered

Indian families across the length and breadth of the

country. The major purpose of the study was to provide

an objective measure of the economic wellbeing of

Indian families by evaluating their level of financial

security and vulnerability as compared to their financial

risks, based on their earnings, expenditures and savings.

Also, this study was aimed at understanding the

significance of life insurance as a risk-mitigating tool for

Indian households and to arrive at a risk profile of Indians

across various socio-economic and demographic groups.


1.2 About the survey

Since its inception, the NCAER has initiated long-term

research programmes in the field of income,

investment and savings. The most recent study –

known as the National Survey of Household Income

and Expenditure (NSHIE) – was undertaken to generate

a more robust and reliable estimate of household

income. The Max New York Life – NCAER India Financial

Protection Survey (IFPS) rode on this study. Survey

procedures such as approach, concepts and

definitions, sample design and sample size, content of

the questionnaire and estimation procedure were

executed after reviewing best international practices1.

Details about concepts, definitions and survey

methodology used in survey are given in Annexure I.

This survey was aimed at generating reliable estimates

at the states-level covering both rural and urban India.

Both quantitative (sample survey) and qualitative

(PRA/RRA techniques) approaches were employed to

generate the primary data. A multi-stage stratified

sampling scheme was adopted to generate

representative samples. Sample districts, villages and

households form the first, second and third stages,

respectively, for selection of the rural sample while

cities/towns, urban blocks and households are the

three stages of selection for the urban sample.

Sample size and its distribution were determined on

the basis of the accuracy required and the resources

available. In rural areas, a sample of 31,446

households out of preliminary listed sample of

210,439 households was covered which were spread

over 1,976 villages in 250 districts and 64 NSS regions

covering all major states. Similarly, in urban areas, a

sample of 31,570 households, out of a preliminary

listed sample of 240,353 households, was spread over

2,255 urban wards in 342 towns and 64 NSS regions

covering 24 states.

To increase accuracy and ensure adequate item

response, the survey was conducted by adopting face-

to face interviews of heads of households as well as

their members using a questionnaire-based approach.

Non-response and non-sampling errors were reduced

by conducting focus group discussion, proper training

of interviewers and supervision.

Detailed information was collected on the

demographic profiles of households, their

composition, components of household income,

consumption expenditure and on relevant qualitative

indicators related to economic activities of households.

An exclusive module containing aspects such as the

motivation to save, reasons for saving, preferred mode

of saving, investment, borrowing, household

economic shocks, insurance, perception about

well-being, etc were canvassed to all sample

households to measure the level of financial

vulnerability.

1.3 Importance of the study

For a nation that is among the world’s fastest growing

economies, it is imperative to measure the economic

well-being of its citizens on an ongoing basis. By

tracking the various parameters that contribute

towards the social and economic well-being of the

people and their ability to protect themselves and

their families against unforeseen crisis, the findings of

this study would help arrive at a true measure of

economic well-being of India’s populace.

One of the critical findings of this study is the sheer

lack of awareness about financial protection in rural,

as well as urban India. Remarkably, although

economists and social planners are aware of gaps in

social security, citizens on their part too are quite

callous and unaware of the need to protect

themselves financially. The findings of this study are

1The major sources reviewed includes Situation Assessment Survey of Farmers (NSSO); Integrated Household Survey (NSSO); Employment andUnemployment Survey (NSS); All India Rural Household: Survey on Saving, Income and Investment (NCAER 1962); Survey on Urban Income and Saving(NCAER 1962); Market Information Survey of Households (1985-2001, NCAER); Micro-Impact of Macro and Adjustment Policies (MIMAP, NCAER); RuralEconomic and Demographic Survey (NCAER); Expert Group on Household Income Statistics, Canberra Manual; Household Income and ExpenditureStatistics (ILO); Chinese Household Income Project (1995) and Household Income and Expenditure Survey (Sri Lanka) etc.


unique as no comparable data exists for the country

prior to this study. Therefore, this study is an

eye-opener, not just for marketers of insurance

products but also for policy and decision-makers in

the government.

This survey is also important in view of the fact that

National Sample Survey (NSS) 61st round (2004-05) the

data on household consumer expenditure is available

and this provides an opportunity to attempt a

meaningful comparative analysis through these two

data sets. It is hoped that the resultant data sets will

be useful to different sets of users such as core

researchers, policymakers and service providers.

This study has demonstrated that it is not impossible

to collect reasonable data on income, expenditure and

savings. Thus, the resulted approach, survey

methodology and related experiences will add new

dynamism in this area and will be helpful in such

studies in the future.

1.4 Plan of the report

This report has six chapters, five boxes and one

annexure. The major findings of the study are

presented in the Executive Summary, in the beginning

of the Report. The present chapter introduces the

study. It is followedly a box – Reliability of Estimates.

We have compared the findings of this survey with

those of NSS 61st Round and Census 2001 in order to

check the reliability of the estimates.

Chapter 2 gives a detailed analysis of the household

earnings relating to socio-economic and demographic

characteristics of households. It is followed by a box –

Income Inequality. It takes a deeper look at income

inequalities based on parameters such as socio-

economic groups, education, income levels and

ownership of consumer durables.

Chapter 3 presents a similar analysis of the households’

routine and non-routine expenditure. It is followed by a

box – Estimates of Financial Vulnerability. This box

analyses financial vulnerability across parameters like

household income, education levels and occupations.

In Chapter 4, savings, its distribution and different forms

in which savings is held are discussed. In addition, this

chapter also discusses the household saving behaviour

elaborating some relevant aspects such as motivation to

save, preferred forms of savings, perception about the

stability of the main source of household earnings and

managing economic shocks. This is followed by a

box – Profile of Investors. This box analyses the profile of

households that invest in financial instruments – such as

small savings, stocks and insurance – across parameters

such as income levels, occupation and education.

Chapter 5 exclusively focuses on life insurance and has

detailed findings on awareness about life insurance,

ownership of life insurance among Indian households

and the size of insurance premium payments.

Socio-economic and demographic characteristics of

insured versus uninsured households are examined

with a view to learn more about the enabling factors

in order to increase the volume of household savings

in this form. The last box – Potential Market for Life

Insurance – takes a closer look at the profile of

households that have the purchasing power and are

aware of insurance, but are not insured. This segment

comprises an immediate market potential that existing

players in the industry can exploit.

This box is followed by Chapter 6 – The Way Forward.

It takes a closer look at the lacunas in the system,

insofar as life insurance is concerned and recommends

steps that need to be taken (by the service providers,

policy-makers, NGOs and the corporate sector) in order

to ensure better financial security at the country level.


Surveys often tend to bring to fore certain stark

trends and statistics. And invariably, doubts are raised

over the reliability of such data. Do we really need to

view income and expenditure data generated

through a survey with caution? While there is no

foolproof method by which one can establish the

reliability of all survey results, there are procedures

which when adopted, can raise the degree of

confidence one can place in the findings of a survey.

The most widely used and fruitful procedure is to

compare the survey estimates with the estimates

generated by other reliable sources. The Max New

York Life-NCAER India Financial Protection Survey has

attempted to compare some of the important

indicators and estimates in this study with that of

other reliable data sources, such as Census 2001,

National Accounts and even the National Sample

Survey (NSS) 61st round.

This survey’s estimate of average household size

(4.99 members) appears consistent with the

estimates obtained from NSS 61st round (4.89

members) and Census 2001 (5.37 members). A

similar pattern is also observed in the case of the

sex ratio – this study estimates the sex ratio at 927,

against 950 by NSS and 933 by Census 2001. All the

three data sources are also fairly comparable on

some other parameters, such as the distribution of

households by socio-religious groups. These results

are presented in the figure below.

A common problem faced by such surveys is the

under-statement of economic data (income,

expenditure and savings) by the respondents. This

leads to a higher margin of error in the estimates of

income and expenditure. The total income of

households is arrived at after considering incomes

from salaries and wages, self-employment in non-

agricultural activities, labour (casual and agricultural

labour), self-employment in agriculture, others

(interest, pension, remittances, rent, etc). While

estimating expenditure, both routine (food, housing,

health, education, transport, consumer durable, etc)

and non-routine (social ceremonies, large education,

medical, leisure travel, etc) expenditures are taken

into account.

While the NSS 61st round (2004-05) gives an annual

monthly per capita expenditure (MPCE) of Rs 725,

estimates from the current survey peg this figure at

Rs 678. Figures for different groups like the SC/STs

and OBCs are also remarkably similar.

Gross income, as estimated by this current study, is

found to be around 56 per cent of the personal

disposable income provided by the National Accounts

Statistics (NAS). An estimate of surplus income (as an

indicator of savings) is arrived at by subtracting the

total household expenditure from the total household

income. Through this method, this survey found

estimates of savings as a proportion of disposable

income to be 22.2 per cent, as against the official

estimate of 27.1 per cent for the year 2004-05. These

differences in estimates can be attributed to the

following factors. One, this survey did not cover some

RELIABILITY OF ESTIMATES


of the smaller states and union territories which

account for about 4 per cent of the population. Two,

according to the Central Statistical Organisation (CSO),

the household sector by definition comprises of

individuals, non-government non-corporate

enterprises of farm business and non-farm business

like sole proprietorships and partnerships, and non-

profit institutions. This survey, on the other hand,

covers only households. Three, certain components

of income are not perceived as income by the

respondents and hence they get excluded from

incomes reported in income surveys. Items like

reimbursements for travel, medical and other such

expenses are not reported correctly in this survey.

To check the data reliability, a variety of methods

are used. The most common amongst them are

evaluation of sampling and non-sampling errors.

Sampling errors are measurable within the

framework of the sample design and are also

controllable by varying the size of the sample. For

instance, the average income per household is

Rs 65,041 and its standard error is Rs 4; the average

amount of life insurance payments made per

household is Rs 1,227 and its sampling error is

negligible -- at Re 1. Nearly 6.2 per cent of all urban

households reported payments towards life

insurance and their (average) insurance payment

amounts to Rs 2,528. This estimate is subject to a

standard error of Rs 2.

One of the major objectives of this study was to

generate a reliable estimate of household income.

The standard error and coefficient of variation of the

estimated average household income for various

income quintiles is consistent and within permissible

limits. This generates a fair degree of confidence in

the estimates presented in this report.

Another important source of error, which can vitiate

the estimates, is the non-response rate. In the case

of this survey, it was around 3 per cent and largely

due to unanticipated reasons such as the

psychology of the respondent. Non-sampling errors

arise mainly from three sources. One, respondents

refuse to cooperate and deny information; they

supply partial information that may not be usable;

or they deliberately provide false information. Two,

the interviewers are also prone to have some

preconceived notions whereby some biases creep

into the schedules. Three, respondents may not

remember all the relevant numbers sought by the

interviewers. And this tends to considerably

increase the margin of error in the data collected.

There is no satisfactory procedure for a precise

measurement of non-sampling errors. A team of

trained interviewers (250), supervisors (50) and

NCAER professionals (14) from different language

groups were engaged for about four months to

undertake the task of primary data collection. The


field team was thoroughly trained through all the

phases of the surveys. Every care was taken to

implement maximum possible quality control in

recording of the answers of the respondents.

Before we turn to the next chapter, here’s a

word of caution. While there are possibilities of

making adjustments to survey estimates at the

aggregate level, there is no satisfactory

procedure to correct data at the household

level. Therefore, all the estimates - income,

expenditure, savings etc - presented in

subsequent chapters are based on two factors –

the population covered by this survey and what

was reported by the respondents. It is

important to keep these limitations in mind

while drawing any conclusion from the results

presented in this report.


According to the Max New York Life-NCAER India

Financial Protection Survey3, there are 205.9 million

households in the country, of which 30 per cent (61.4

million) live in urban areas and the rest (144.5 million)

in rural areas. Given that urban families are marginally

smaller than rural ones, the share of India’s urban

population is slightly lower — at around 28.6 per cent.

While the average family size in the country is 5

members, less than one per cent of Indian households

are single-member ones and around 10 per cent have

more than seven members.

Since only 17 per cent of women work, the average

number of workers per household is 1.4 (1.34 in urban

areas and 1.43 in rural ones). And around 28 per cent

of the country’s population is engaged in financially

remunerative job of some sort. Indeed, 68.8 per cent

of households have just a single earning member while

23.7 per cent have two earning members and 7.5 per

cent have more than two earning members.

At the all-India level, when we analyse households on

the parameter of highest literacy amongst their

members, we find that 19 per cent have members

who have passed middle school (8th class), nearly a

fourth (23 per cent) of households have at least one

member who has completed high school (10th class),

and 18 per cent higher secondary (12th class). At the

all-India level, 17 per cent of all households have at

least one graduate member – the figure is 30 per cent

for urban areas and 11 per cent for rural areas.

1The Great Indian Middle Class, NCAER (2005), defines the middle class as those households with an annual income of between Rs 2-10 lakh at2001-02 prices.2The Survey was undertaken concurrent to the NCAER’s National Survey of Household Income and Expenditure (2004-05), attempted to generate reliabledata on household income in the country.

The large differences in income, expenditure and savings patterns betweenrural and urban India are a pointer to how things will unfold as urbanisationlevels in the country increase. Urban households earn around 85 per centmore than rural ones, spend three-fourths more and, as a result, save nearlydouble that of rural households. Much of this can be explained by differencesin profession and education. Even for the same profession and levels ofeducation, urban earnings are higher. The lowest income quintile accounts for22.4 per cent of the population and just 6 per cent of income. But India ischanging rapidly – the middle classes, which accounted for 2.7 per cent ofthe population in 1995, accounts for 8.3 per cent today2. However, theregional disparities are a matter of concern. Two-thirds of the poor reside inthe 10 low-income states.

CHAPTER 2HOW INDIA EARNS


2.1 INCOME-EXPENDITURE PROFILE

The average household in India had an annual income3

of Rs 65,041 in 2004-05, and an expenditure of

Rs 48,902, leaving it with a surplus of Rs 16,139 to save

and invest. Urban income levels are around 85 per cent

more than rural ones (Rs 95,827 per annum versus

Rs 51,922 per annum). Since expenses in urban areas

are substantially higher (Rs 69,065 per annum in urban

areas versus Rs 40,309 per annum in rural ones), the

difference in the surplus income (of urban and rural

areas) that can be saved or invested is not all that huge

in absolute terms. The average urban household saves

nearly double that of a rural household (Rs 26,762 per

annum in urban areas versus Rs 11,613 for rural areas).

2.2 INCOME BY OCCUPATION

Labourers constitute the largest segment of the

population, heading a little over 31 per cent of the

country’s households; self-employed agriculturists are

the next largest segment (30.3 per cent), salaried

members account for a little over 18 per cent and the

non-agricultural self-employed account 17.5 per cent

of the country’s households. The figures differ for rural

and urban areas – while the salaried account for just

10.5 per cent of rural households, in urban areas they

account for 36.9 per cent.

Income levels vary significantly across rural and urban

areas, as well as across occupation groups. The self-

employed in agriculture comprise the largest group in

rural areas, accounting for 41.3 per cent of the

population and 42.8 per cent of income – in other

words, they are the average rural household. In urban

3Household income is often misunderstood by survey respondents, especially the self-employed who tend to state income as net of even consumptionexpenses instead of just netting out production expenses. So some degree of under-reporting is possible.


areas, by contrast, this group accounts for just 3.1

per cent of the population and just 2.6 per cent of

total urban income – this is despite the fact that

urban agricultural households earn nearly two-thirds

more than their rural counterparts (Rs 91,133 per

annum versus Rs 55,491 per annum).

There is not toomuch difference in the income levels of

the non-agricultural self-employed and those earning

regular salaries in urban areas, though the difference is

as high as 45 per cent in rural areas. Those earning

salaries account for around 37 per cent of urban

households and a little over 45 per cent of the total

income earned by all urban households. In the case of

the self-employed in non-agricultural areas, the second

largest group at 32.5 per cent of urban households, the

share of total income is around 38.1 per cent.

Those households whose chief earners are labourers,

not surprisingly, account for a higher proportion of

total households as compared to their share in overall

Figure 2.5:Share of population and income byoccupation of chief earner - All India

18.1

0 4020

Regularsalary/wages

Selfemployment innon-agriculture

Labour

Selfemployment

in agriculture

Others

30.8

17.525.0

31.215.6

30.325.1

2.83.5

22

19

6

11

16

PCI (Rs.000 per annum)

% share in population and income

% share of population % share of incomePCI (Rs. 000 per annum)

30

352010 15 25 3050

10

Figure 2.4:Share of population and income byoccupation of chief earner - Rural

10.5

0 50

0 35

30

Regularsalary/wages


Labour

Selfemployment

in agriculture

Others

19.5

14.7

34.620.2

41.342.8

2.12.8

19

13

6

11

14



11.5


10 20 40

205 10 15 25 30


income levels, and this is even more true for urban

areas. Households headed by labourers accounted for

34.6 per cent of rural households and 20.2 per cent of

rural incomes; in urban areas, the figures were 22.9

per cent and 9.7 per cent respectively. While urban

labour households earned 37 per cent more than their

rural counterparts, the lower relative share in income

levels in urban areas is a function of much higher

incomes for other social groups. At the all-India level,

the labour class has the largest difference between the

share of such households in the total population (31.2

per cent) and the share in total income (15.6 per cent).

The self-employed in agriculture are the only other

group, where the population share (30.3 per cent) is

higher than the income share (25.1 per cent). But the

difference here is much lower.

2.3 INCOME BY AGE-GROUP

Though India’s demographic profile is changing and

India is getting younger, it is the higher age-groups

that earn more. Those in the 55-65 year age bracket,

for instance, comprise 2.6 per cent of the population

at the all-India level but 3.1 per cent of the total

income. Households whose chief earners are in the 46-

55 year age group account for 21.9 per cent of the

all-India population and 25.2 per cent of the all-India

income.

Average household income, at the all-India level, rise

from Rs 47,192 per annum in the case of households

where the chief earner is below 25 years old, to

Rs 55,663 in the 26-35 year age group, to Rs 85,841

Figure 2.6:Share of population and income by age ofchief earner - Urban

4.6

0 4020

Lessthan 25

26-35

36-45

46-55

55-65

3.6

24.9

22.3

36.9

34.9

22.726.8

8.89.7

16

18

19

24

22




66+2.1

2.625

Ag

eo

fch

ief

earn

er(Y

ears

)

10 30

352010 15 25 3050

Figure 2.7:Share of population and income by age ofchief earner - Rural

5.2

0 4020

Lessthan 25

26-35

36-45

46-55

55-65

4.5

25.1

22.4

36.4

34.4

21.6

23.9

8.911.3

9

9

10

11

13




66+2.73.6

13

Ag

eo

fch

ief

earn

er(Y

ears

)

10 30

0 35205 10 15 25 30


per annum for households where the chief earner is

above 66 years old. Since this is as true of rural India as

it is of urban India, presumably the earnings are not

from professional income alone but from savings and

investments and ownership of land.

In both rural and urban areas, households with chief

earners in the 36-45 year bracket account for the

biggest share of both the total population as well as the

total income. At the all-India level, 36.5 per cent of all

households are headed by a person in the 36-45 year

age group – these households account for 34.6 per cent

of the total income at the all-India level. The average

household income for this age group is Rs 61,787 at the

all-India level. In rural areas, such households account

for 36.4 per cent of the total population and 34.4 per

cent of income. For urban areas, the figures are 36.9

per cent and 34.9 per cent respectively.

2.4 RURAL-URBAN DIVIDE

Given that agriculturists are the largest group in rural

India, it is not surprising that rural income levels are

just slightly more than half of those in urban areas.

More importantly, at every level of education and

occupation, urban income is higher than those in rural

areas. In the case of the salaried class (such households

comprise 36.9 per cent of all urban households and

10.5 per cent in rural areas), urban salary levels are

around 15 per cent higher (the household income is

Rs 114,545 per annum in urban areas versus Rs 99,243

in rural areas). For labourers (34.6 per cent of rural

households and 22.9 per cent of urban households),

urban earnings are 37 per cent higher than rural ones;

it is 74 per cent in the case of the non-agricultural self-

employed and 64 per cent higher in the case of

households headed by agricultural labourers.

Another way to look at the rural-urban disparity is to

compare the population shares with income shares

across rural and urban areas. Households headed by

salary earners in rural areas earn less than what they

do in urban areas. The average salaried household in

rural area earns almost double (Rs 99,243 per annum)

the average for all rural households (Rs 51,922 per

annum). As a result, while such households account for

10.5 per cent of all rural households, they account for

19.5 per cent of all rural incomes.

Similarly, rural households headed by labourers earn a

lot less than their counterparts in urban areas – yet,

the share of such households in total income is a lot

less adverse than it is in urban areas. Such households

comprise 34.6 per cent of rural households and 20.2

per cent of total rural income; in urban areas, the

figures are 22.9 per cent and 9.7 per cent respectively.

2.5 IMPACT OF EDUCATION

Most chief earners who are educated up to high school

(10th) tend to be self-employed in agriculture (between

46 and 52 per cent of such households). However, once

the chief earner in rural areas has passed higher

secondary (12th), things change. Just 31.2 per cent of

rural households cited self-employment in agriculture as

their primary source of income when the chief earner

had passed higher secondary – 35.9 per cent of

households in this group earn their income from regular


salaries. For those who are either diploma holders,

graduates or post-graduates, between 57.6 and 62.3 per

cent of households earned their income from salaries –

the proportion of those engaged in agriculture fell to

between 10 and 20 per cent.

A similar situation prevails in urban areas. But in this

case, it is not agriculture that is the dominant

profession for the illiterate and the poorly educated.

It is manual labour. Nearly 40 per cent of urban

households where the chief earner is illiterate earn

their living through manual labour. Once the chief

earner has attained the education upto high school

(10th), he tends to be engaged in some small

business/trading. Once the chief earner gets more

educated, say at graduation and above, we notice that

salaries are the main source of income. 73 per cent of

all urban post-graduates, for instance, earned their

household incomes from salaries.

Education, not surprisingly, makes a big difference to

earning levels in all cases, though the impact of

education is truly seen only when combined with

opportunity. Which is why salary levels for various

education groups differ widely across rural and urban

areas, and across different types of cities – where the

opportunities are higher, the rewards for education are

also higher.

Around a fifth of households across the country (26

per cent in rural areas and 7.9 per cent in urban areas)

are headed by illiterates while a similar number are

headed by those who have just passed primary school

(5th class) (22.5 per cent in rural areas and 11.5 per

cent in urban areas). Just around one-seventh of

households across the country are headed by those

who have completed graduation.

Salary levels range from Rs 37,574 per annum for

illiterate households to Rs 131,104 (that is, 3.5 times that

of lowest level) for graduate households. For each level

of education, salary levels in urban areas are higher as

Figure 2.9:Earnings by level of education for salariedhouseholds - All India

3.8

0

0 80,000

Illiterate

Up toprimary

Middle

HighSchool

HigherSecondary

2.3

6.24.2

8.25.4

19.817.3

18.917.2

64,982

Household income (Rs. per annum)

% share in household and income

Household (%) Income (%)Household income (Rs. per annum)

Graduate+

2010

40,000

43.153.6

73,760

71,282

94,979

98,961

135,015

30 40 50 60

120,000 160,000


compared to rural areas. In the case of illiterate

households, the average earnings in rural areas is

Rs 36,028 per annum versus Rs 49,464 in urban areas;

for graduates and above, average rural earnings are

Rs 109,527 as compared to Rs 143,302 in urban areas –

on an average, urban earnings at each level of education

are around a third higher as compared to rural areas.

Within the group of just the salaried classes, however,

the difference between the earnings of the illiterate

and the graduates narrows down considerably, to a

little over two times. Households headed by graduates

earn Rs 135,015 at the all-India level as compared to

Rs 64,982 for those headed by illiterates. The reason for

this lower reward to education (across all professions,

the difference between the illiterate and graduate

households is around 3.5) is that salary levels for even

the illiterate are higher in this group than the salary

level in all other groups– thus, a salaried household

headed by an illiterate earns Rs 64,982 per annum as

opposed to just Rs 37,574 when the household is

headed by an illiterate who could be an agriculturist, a

labourer, or engaged in any other profession.

2.6 DISPARITY BY CATEGORIES OF LANDHOLDING

The quantum of land owned by a rural household is

perhaps an important indicator of the economic status

of the household which is certainly more relevant in

the context of rural India. Nearly 40 per cent of rural

households in India do not possess any land while 30

per cent own between 0.1-2 acres of land.

4 Land class: Landless –0 acre, Marginal - 0 –2 acre, Small – 2-4 acre, Medium – 4-10 acre, Large – over 10 acre


Levels of land possessed5 have as much of an impact on

earning levels as occupation does. Households that do

not own any cultivable land form the largest group with

average household size of 4.68. While they comprise of

37.3 per cent of the population, their share in rural

income is 30.7 per cent. In contrast, large farmers

account for just 4.7 per cent of the rural population and

they contribute about 9 per cent to rural income.

Within these categories of land, a larger proportion of

landless households have chief earners who are either

illiterates or have low levels of education. Over a third

of households in landless categories are illiterate and

just 6 per cent of them are graduates. Nearly 10 per

cent of households with more than 10 acres of land

are headed by those who are graduates.

Since landholding by the households are interrelated

to occupation, the bulk of landless households are

labourers (68 per cent). Households with large land

holdings have a higher share of households with

agriculture as a major source of income (78 per cent)

in comparison with just 2.5 per cent agriculture

households in landless categories.

2.7 REGIONAL DISPARITY

As per CSO estimates, the per capita net domestic

products at current prices for 2004-05 vary

significantly across the country, ranging from

Rs. 29,137 for Delhi to Rs. 6,277 in Bihar, a difference

of around five times between the richest and the

poorest states. If the various states are bunched into

5 Land possessed=Land owned + Land rented-in – Land rented out


three categories6 of low, middle and high income

(based on the level of their per capita income), you will

find that 48 per cent of Indians live in the low- income

states, 30.6 per cent in the middle income ones and

the balance in the high-income states.

While accounting for 48 per cent of the population,

these low-income states account for just 36 per cent

of the country’s GDP. The high income states account

for 21.4 per cent of the population and 29.9 per cent

of the total GDP.

Not surprisingly, the bulk of the population in the low-

income states is poor – 30 per cent of households in

these states fall in the lowest quintile, and just 12.5

per cent of households fall in the top-most income

quintile. In the high- income states, the situation is the

reverse – while just 11.4 per cent of households fall in

the lowest income quintile, 32.6 per cent of

households fall in the top most income quintile.

Looked at another way, nearly 67 per cent households in

the lowest income quintile (Q1) are those residing in the

low income states; 20.8 per cent of households in the

lowest income quintile are from middle income states

and just 12.3 per cent are from high income states.

In the highest income quintile, around 26.7 per cent

of households are from the poorest states, 38.2 per

cent from the middle income states and 35.1 per cent

from the high income states.

2.8 DISPARITY BY THE SIZE OF TOWN

Levels of urbanization have as much an impact on

earning levels as education does. As a result, urban per

capita income ranges of from Rs 15,164 (Rs 77,185

6 Low income states: Assam, Bihar, Madhya Pradesh, Meghalaya, Orissa, Rajasthan, Uttar Pradesh, Chattisgarh, Uttaranchal and Jharkhand; Middleincome states: Andhra Pradesh, Himachal Pradesh, Karnataka, Kerala, Tamil Nadu and West Bengal; and High income states: Goa, Gujarat, Haryana,Maharashtra, Punjab, Pondicherry, Chandigarh and Delhi


household income per annum) in towns that have

population of less than 50,000 to Rs 24,210 (Rs 114,029

household income per annum) in towns that have

population of more than 10 lakh. Towns with more than

10 lakh population have an income share that is 1.9

times their population share, while in the case of towns

with less than 50,000 population, this ratio is around 1.2.

Within these town classes, smaller towns have a

higher share of households headed by either illiterates

or those with lower levels of education – over a third

of households in towns with more than 10 lakh

population are headed by those who are graduates

while in towns with less than 5 lakh population, this

goes down to around a fourth.

Figure 2.13:Earnings of graduate households inselected cities

Delhi

Chandigarh

Ahmedabad

Lucknow

Kolkata

Jaipur

Hyderabad

Chennai

Bangalore

GreaterMumbai

Share of graduate+household (%)Household income (Rs. �000 per annum)

0 300150

25847.8

22843.0

13740.7

16140.2

18139.4

13337.6

16537.4

18135.0

16831.0

21126.2

25020010050


Within each category, earning levels are higher in

larger towns. So, households headed by graduates

earn Rs 208,249 per annum in towns with a

population of more than 10 lakh persons as compared

to Rs 147,970 per annum in the case of towns which

have a population of less than 5 lakh persons.

Since education levels are also related to choice of

occupation, larger towns have a higher share of salary

earning households (46.9 per cent) in comparison with

smaller towns (30.3 per cent). Indeed, in smaller towns

with less than 5 lakh population, the share of

households that are headed by labourers is roughly

equal to the number headed by businessmen and

those headed by salary-earning professionals.

2.9 DISPARITIES IN SELECT CITIES

How much of a difference does the size of a town

make to income levels is best seen from the difference

in income levels across various cities. Greater Mumbai,

India’s most populous urban agglomeration, accounts

for 6.5 per cent of the country’s urban population and

13.2 per cent of its income – that is, its income share

is more than double its population share. Delhi, the

next most populous area, accounts for 4.9 per cent of

population and 10.6 per cent of income, which is 2.2

times the population share. By the time you come to

smaller cities like Jaipur and Lucknow, the income and

population shares are roughly the same. There are, of

course, exceptions such as Chandigarh – it accounts for

0.3 per cent of the country’s total urban population

and 0.7 per cent of urban income.


Within these cities, the larger ones tend to have more

households headed by those with higher degree of

education. Thus, 47.8 per cent of households in Delhi

are headed by those who have graduate degrees, as

compared to a lower 37.6 per cent in the case of Jaipur.

Salary levels also differ accordingly. Since larger cities

tend to have higher job availibility, graduate

households in Delhi earn Rs 258,000 per annum on an

average. This falls to a much lower

Rs 133,000 per annum in Jaipur. Even households

headed by illiterates earn more in bigger cities –

Rs 101,000 per annum in Delhi as compared to

Rs 42,000 per annum in Lucknow.

While the bulk of households in most large cities tend

to be salaried, in case of smaller cities like Jaipur, there

are more businessmen. Earning levels across all

occupation groups, not surprisingly, are higher in cities

like Delhi and Mumbai. So, a salaried household in Delhi

earns Rs 183,000 per annum as against Rs 104,000 per

annum in Ahmedabad; a business household in Delhi

earns Rs 299,000 per annum as compared to

Rs 148,000 per annum in Ahmedabad.

Table 2.10:Profile of households in selected cities

DelhiKolkataGreater MumbaiHyderabadBangaloreChennaiAhmedabadJaipurLucknowChandigarh

Estimatedhousehold(�million)

3.022.984.041.351.481.590.860.510.490.21

Estimatedpopulation(�million)

14.4413.1019.135.396.146.583.763.102.461.01

Averagehousehold

(size)

4.784.394.734.004.134.144.376.105.024.79

Percapita

income (Rs)

43,15527,86840,76828,76829,39432,40326,68318,80822,06941,018

Share tourban

population (%)

4.894.446.481.822.082.231.271.050.830.34

Share tourban

income (%)

10.586.2013.252.633.063.621.710.990.920.70


Disparities of income can be better understood by

splitting households into per capita income quintiles.

For instance, the findings of this survey reveal that

people belonging to the lowest income quintile (Q1)

have a mean annual per capita income of Rs 3,534.

While they comprise 17.9 per cent of the

households, their share in total income is only 5.4

per cent. In contrast, the highest income quintile

(Q5) accounts for 22.3 per cent of the households,

but 51 per cent of the total income. At Rs 33,170 per

annum, the mean annual per capita income of the

top-most quintile is about 9 times that of the lowest

quintile. While these are all India numbers, a similar

trend is observed even when we analyse income

quintiles of rural and urban India.

This survey has used state-wise expenditure poverty

lines (EPL) for 2004-05, as defined by the Planning

Commission, to calculate the poverty ratio based on

the income data it had collected. It is estimated that

214 million persons out of an estimated population

of 1,027 million fall under the category of poor. This

gives us an all India incidence of poverty estimate of

20.8 per cent. The incidence of income poverty in

INCOME INEQUALITY

7The poverty estimates should be seen as provisional. It is culculated using income data from “National Survey of Household Income and Expenditure”.


rural and urban areas is estimated to be 21.7 per

cent and 18.7 per cent respectively.

Results have shown that the degree of deprivation is

a function of education (highest education level in a

household) and the major source of income. While

nearly 26.7 per cent of non-poor households have at

least one graduate, just 8.5 per cent of poor

households qualify this attribute. A higher

percentage of poor are primary educated (25.5 per

cent) and illiterates (7.2 per cent) compared to just

10.4 per cent and 3.8 per cent respectively in the

case of non-poor households.

Major source of household income varies

significantly across poor and non-poor households.

Labourers constitute the largest segment of poor

households and comprise over 62 per cent of such

households. In contrast, this group accounts for 26

per cent of the non-poor households. Those earning

salaries account for 21.7 per cent of non-poor

households whereas just about 4.4 per cent of poor


Ownership of (select) consumer durable goods among

the non-poor households is significantly higher than

those of poor households. At an all-India level, 33 per

cent of non-poor households own colour television

sets, 25 per cent have telephone, 22 per cent have

refrigerators, 19 per cent own cellular phones, nearly

7 per cent have cars and 2 per cent own credit cards.

In contrast, 8 per cent of poor households own colour

television sets, 4 per cent have telephones, 3 per cent

have refrigerators, 3 per cent own cellular phones,

and hardly 1 per cent have cars and credit cards each.


CHAPTER 3HOW INDIA SPENDS

According to the Max New York Life-NCAER India

Financial Protection Survey, apart from the large

differences between urban and rural areas in terms of

levels of both income and expenditure, there is a big

difference in the way this money is both spent and

saved. The average Indian household spent about

three-fourth of their income on routine1 and non-

routine2 expenditure in 2004-05. The rural-urban

divide is evident in the spending patterns of

households. While rural households spend (on an

average) Rs 18,404 on food items in a year, urban

households’ spend level on food items is Rs 26,858.

Rural households’ expenditure on non-food items is

lower - at Rs 14,835 per year - compared to urban

households’ expenditure of Rs 32,273 per year. While

non-routine expenditures account for around 13.6 per

cent of income in rural areas, the figure is marginally

lower at 10.6 per cent in urban areas – for the country

as a whole, it is 12.2 per cent.

Urban households spend around 45 per cent of their

income on food while the figure is around 55 per cent

in the case of rural households. There is a large

difference in the proportions spent on housing (5.9

per cent in urban areas versus 3.8 per cent in rural

areas) and on education (8.7 per cent versus 6.4 per

1Routine expenditure includes consumption expenditure on food, housing, health, education, transport, clothing, durables and other such expenseshousehold generally incurs.2Non-routine expenditure includes large expenditure on ceremonies (such as weddings, births, etc), medical, higher education, leisure travel, etc. Medicalexpenditure is usually unplanned.

Apart from the large differences in urban and rural incomes, there is a big

difference in themanner in which this is spent and saved. This difference persists,

not just in terms of the share of income that is used for consumption of items

like food, but also in terms of the purchase of various durables, expenditures on

health and education and even in terms of borrowing from an organised financial

institution or depositingmoney with them. In someways, however, there is little

difference between rural and urban households – both groups report a fairly

large non-routine expenditure. Not surprisingly, expenses on items like food tend

to drop as a share of both income and expenses, as households get richer. This

phenomenon is also noticed as youmove from smaller to bigger towns, and even

as the occupation of the chief earner changes. It must be recognised that

migration, education and occupation are all closely linked to income.


cent). But expenses in other areas like health (4.7

per cent versus 4.6 per cent), clothing (7.1 versus 6.8

per cent) and buying durables (4.9 versus 5 per cent)

are not too dissimilar.

Among non-routine expenses, expenditure on social

ceremonies has a major share and accounts for 52 per

cent. Medical emergencies is the next major item with

households spending about 27 per cent, followed by

large expenses on education (8 per cent) and leisure

travel (4 per cent).

3.1 EXPENDITURE PATTERN BY OCCUPATION

As income levels vary across various occupation groups

(i.e., major source of household income), both

expenditure levels and patterns also change

dramatically. Households whose main source of income

is salaries/wages have the highest annual income as

well as the highest annual consumption expenditure.

They spend more on non-food items (Rs 33,560 or

55%) than on food items (Rs 27,975 or 45%). The next

group of high earners and spenders are households

whose chief source of income is self-employment in

non-agricultural activities. Earning about Rs 95,316 per

year, these households spend Rs 55,773, of which

Rs 29,173 (52%) is spent on non-food items and

Rs 26,601 (48%) on food items.

Figure 3.3:Distribution of non-routine expenditure

0 10050

Rural

Urban

All India

Ceremonies Medical EducationTravel Others

55.4 28.8 4.7

2.8

8.2

44.9 25.1 13.0

5.9

11.2

51.5 27.4 7.8

3.9

9.3

Non-routine expenditure (%)10 20 30 40 60 70 80 90

Figure 3.2:Distribution of routine expenditure

100

90

80

70

60

50

40

30

20

10

0Rural Urban All India

Food Housing Health TransportEducation Clothing Durables Others

55.4

Ro

uti

ne

exp

end

itu

re(%

)

45.4 51.1

4.74.7

10.5

7.46.95.0

9.8

5.94.6

11.1

8.7

6.85.0

12.5

3.84.7

10.0

6.47.14.97.7


In terms of share, food expenses (which comprise 51.1

per cent of all routine expenditure at the all-India level)

rise to 59.2 per cent in the case of households headed

by labourers. This falls to 54.4 per cent in the case of

households headed by agriculturists and to 45.5 per

cent in the case of households where the chief earner

is a salary earner.

Expenditure on housing, which is 4.7 per cent at the

all-India level, is a much lower 3.8 per cent in the case

of households headed by agriculturists. This rises to 5.6

per cent in the case of households headed by the

salaried class. There is little difference in the case of

expenditure on health (between 4.4 and 4.8 per cent),

clothing (6.7 to 7.2 per cent) or that on durables (4.8

to 5.1 per cent). The share of expenses on transport

and education, however, vary significantly.

While households headed by labourers spend just 7.2

per cent of their routine expenses on transport, this

rises to 11.9 per cent in the case of the salaried classes.

Education forms 5.1 per cent of the routine expenses

for a household headed by a labourer and this rises to

9.4 per cent in the case of a salaried household.

There is little difference in what constitutes non-routine

expenditure across various occupation groups when it

comes to weddings and other such social expenditures.

The differences widen when it comes to medical and

education expenses. For instance, medical expenses

account for 40 per cent of non-routine expenditure for

households that derive their major source of income

from labour, which is the highest among all groups.

3.2 EXPENDITURE PROFILE BY EDUCATION LEVEL

Since level of education and source of income are inter-

related (for instance, households headed by graduates

are likely to have salary/wages as their major source of

income) impact of education shows similar pattern

when it comes to spends. Food expenses, which

comprise 51.1 per cent of all routine expenditure at the

all-India level, rise to 59 per cent in the case of

Figure 3.5:Distribution of routine expenditure bymajor source of income

Regularsalary/wages


Selfemploymentin agriculture


Labour

45.5

5.64.5

11.9

9.4

6.84.9

11.5

47.7

4.94.4

11.5

8.26.75.0

11.5

54.4

3.84.8

10.5

6.37.25.18.0

59.2

4.44.87.25.17.14.87.4

100

90

80

70

60

50

40

30

20

10

0

Ro

uti

ne

exp

end

itu

re(%

)

Figure 3.6:Distribution of non-routine expenditure bymajor source of income

Regularsalary/wages


Selfemploymentin agriculture


Labour

50.1

22.3

12.7

5.6

9.3

46.1

24.4

8.85.5

15.3

54.4

29.8

4.83.17.8

50.7

39.8

4.81.43.4

100

90

80

70

60

50

40

30

20

10

0

No

n-r

ou

tin

eex

pen

dit

ure

(%)


households headed by illiterates. This falls to 43 per cent

in the case of households headed by graduates. In

absolute terms, graduate households spend more on

non-food items (Rs 41,692) than on food items (Rs

31,509). Illiterates spend less than half of what

graduates spend on food but still end up spendingmore

on food than non-food items.

Expenditure on housing, which is 4.7 per cent at the all-

India level, is a much lower 3.5 per cent in the case of

households headed by illiterates and this rises to 5.5 per

cent in the case of households headed by graduates.

There is little difference in the case of expenditure on

health (between 4.5 and 4.9 per cent), clothing (6.7 to

7.6 per cent) or that on durables (4.8 to 5.4 per cent)

between the households with different levels of

education of chief earner. The share of expenses on

transport and education, however, vary significantly.

While households headed by illiterates spend just 7.9 per

cent of their routine expenses on transport, this rises to

12.6 per cent in the case of graduate households.

Education forms 5 per cent of the routine expenses in a

household headed by an illiterate and this rises to 9.6

per cent in the case of a graduate household.

Figure 3.8:Distribution of routine expenditure byeducation level of chief earner

Illiterate Up toPrimary

Up toHigher

SecondaryFood Housing Health TransportEducation Clothing Durables Others

Graduate+

59.0

3.5

5.0

5.46.7

57.5

3.9

5.66.9

7.6

51.0

4.6

6.94.8

9.8

43.0

5.5

5.1

12.9

7.9

7.6

4.9

4.9

8.84.7

7.5

10.6

4.9

6.7

9.6

12.6

4.5

100

90

80

70

60

50

40

30

20

10

0

Ro

uti

ne

exp

end

itu

re(%

)

Figure 3.9:Distribution of non-routine expenditureby education level of chief earner

Illiterate Up toPrimary

Up toHigher

Secondary


Graduate+

53.1

32.7

2.81.99.6

45.5

40.6

4.13.56.3

53.4

25.2

8.23.89.3

50.9

20.2

5.6

11.2

12.1

100

90

80

70

60

50

40

30

20

10

0

No

n-r

ou

tin

eex

pen

dit

ure

(%)


3.3 EXPENDITURE PATTERN BY

CATEGORIES OF LANDHOLDING

Households owning large landholdings have the

highest annual income as well as the highest annual

consumption expenditure. They spend more on non-

food items (Rs 34,304) than on food items (Rs 30,127).

The next group of high earners and spenders are

households with medium landholdings. Earning about

Rs 79,698 per year, these households spend Rs 46,197

of which Rs 23,162 is spent on non-food items and

Rs 23,035 on food items. Landless households are the

lowest in the earning-spending hierarchy. The former

group earns about Rs 39,333 annually, spending

Rs 27,109. Significantly, the major expenditure

(Rs 15,446) is on food items while non-food spending

amounts to Rs 11,663.

An annual food expense comprises 57.0 per cent in the

case of landless households and this falls to 46.8 per

cent in the case of households with large land

holdings. Expenditure on housing and health, which is

4.7 per cent each at the all-India level, is more or less

Figure 3.11:Distribution of routine expenditure bylandholdings

Landless Marginal Small


Large

57.0

5.9

7.04.87.8

8.84.73.9

58.5

6.2

6.64.86.9

8.8

4.63.6

56.2

6.5

6.94.77.5

10.34.43.5

49.9

7.0

7.55.0

8.5

12.7

5.04.4

46.8

8.0

8.05.89.5

13.4

4.73.9

Medium

100

90

80

70

60

50

40

30

20

10

0

Ro

uti

ne

exp

end

itu

re(%

)

Figure 3.12:Distribution of non-routine expenditureby landholdings



Large

57.2

4.52.37.3

28.7

Medium

50.0

3.61.6

8.1

36.6

57.3

5.23.0

7.6

26.9

56.0

6.14.8

9.0

24.1

62.9

5.33.4

10.4

18.0

100

90

80

70

60

50

40

30

20

10

0

No

n-r

ou

tin

eex

pen

dit

ure

(%)


similar across the categories of landholdings ranging

from 4.4 to 5.0 per cent. There is no major difference

in the proportion of non-routine expenditure across

various categories of land.

Expenses on weddings and other social ceremonies

account for around 57.2 per cent of all non-routine

expenses in landless households and this rises to 62.9

per cent in the case of households owning large

landholdings. The differences widen when it comes to

medical expenses. For instance, medical expenses

account for 29 per cent of non-routine expenditure for

landless households and this reduces to 18 per cent for

households with large landholdings. Expenses on

education, similarly, change as a fraction of non-

routine expenses according to each landholding

category.

3.4 IMPACT OF INCOME

As in the case of level of earnings, the spending

pattern varies significantly across income quintiles. The

expenditure patterns of Indian households in the

lower-income groups is skewed towards high

expenditure on food items. Food expenses, which

comprise 51.1 per cent of all routine expenditure at

the all-India level, rise to 61.5 per cent in the case of

households in the lowest income quintile, and this falls

to 43.2 per cent in the upper-most income quintile.

The results also reveal that it is only households in the

top quintile (Q5) that spend more on non-food items.

Households in the remaining quintile groups spend

more on food items. Consider this: While the bottom

quintile (Q1) spends Rs 13,377 on food items, its

expenditure on non-food items is just Rs 8,377. In

contrast, the top 20 per cent group (Q5) spends

Rs 32,149 on food items and a bigger amount on non-

food items (Rs 42,248).

Spending patterns on other items such as housing,

transport, education, clothing and durables increase

substantially for the top 20 per cent households


compared to other groups. Expenditure on housing,

which is 4.7 per cent at the all-India level, is a much

lower 3.5 per cent in the case of households in the

lowest income quintile and this rises marginally to 4.8

per cent in the top-most quintile. While households in

the lowest income quintile spent around 7 per cent of

their expenses on transport, this rises to 12.9 per cent

in the top-most income quintile. Education forms 5.7

per cent of the routine expenses of a household in the

lowest income quintile as compared to 9 per cent in

the case of the top-most income quintile. There is little

difference in the case of expenditure on health

(between 4.5 and 4.8 per cent), clothing (6.8 to 7.1 per

cent) and durables (4.5 to 5 per cent).

Expenses on weddings and other social ceremonies

account for around 58.1 per cent of all non-routine

expenses in households in the lowest income quintile

and this falls to 51.4 per cent in the topmost quintile.

Medical expenses, similarly, change as a fraction of non-

routine expenses according to each income quintile.

3.5 REGIONAL EXPENDITURE PROFILE

Just as households in the high-income states have a

higher earning capacity – the average annual

household income is Rs 90,285 compared to Rs 65,612

in the middle-income states and Rs 54,423 in the low-

income states – their spending patterns show a similar

trend. However, the degree of variability is

significantly lower. For instance, households in the

high-income states annually spend Rs 49,484

compared to Rs 42,917 by middle-income states and

Rs 35,396 in the low-income states. Expenditure on

food items by households in all three state groups are

more or less similar – ranging from Rs 19,962 in the

low-income states to about Rs 22,418 in the high-

income states. The real difference is in the spend

levels on non-food items. High-income state

households spend Rs 27,068 on non-food items

compared to Rs 21,657 by households in middle-

income states and Rs 15,433 by households in the

low-income states.

The share of food expenses to all routine expenditure

comprise 51.1 per cent at the all-India level, rising to 56.4

per cent in the case of households in low-income states,

and falling to 45.3 per cent in the high income states.

Figure 3.15:Distribution of non-routine expenditure byincome quintiles



Large

58.1

3.11.25.7

32.0

Medium

52.6

3.52.66.9

34.4

48.5

4.12.25.7

39.5

50.4

6.73.2

16.1

23.6

51.4

12.6

6.3

8.8

20.8

100

90

80

70

60

50

40

30

20

10

0

No

n-r

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(%)


Looking at the amounts spent by these three groups

on individual items such as housing, health, transport,

education, clothing, durables and 'others', it is evident

that transportation comprises a large chunk of

expenditure for households in the high-income states

(13%) compared to the middle income (10%) and low-

income (9.5%) states.

In high-income states, housing is another key

expenditure for households. Expenditure on housing,

which is 4.7 per cent at the all-India level, is a lower

4.1 per cent (Rs 1,446) in the case of households in the

low-income states and this rises to 6.1 per cent

(Rs 3,032) in the high-income states.

There is less of a difference in the case of expenditure

on health (4 per cent in the low income states, rising

to 6.1 per cent in the high income states) and

education (7.1 per cent rising to 7.5 per cent).

Weddings, births and other ceremonies account for

the bulk of non-routine expenditure in low-income

states. It is also observed that medical expenses

account for a quarter to a third of non-routine

expenditure across all three state groups. More

specifically, expenses on weddings and other social

ceremonies account for around 56.8 per cent of all

unusual expenses in households in the low-income

states and this falls to 49.1 per cent in the high-income

states. Travel expenses comprise around 1.2 per cent

of non-routine expenses in low-income states and this

rises to 8.5 per cent in the high-income states.

3.6 EXPENDITURE PATTERN BY THE SIZE OF TOWN

As in the case of state categories, a similar expenditure

pattern is also observed amongst the three categories

of towns. An annual food expense comprises 46.4 per

cent (Rs 23,105) in the case of households in smaller

towns (population less than 5 lakh) and this falls to 44.9

per cent (but higher in absolute terms at Rs 30,715) in

towns with a population of more than 10 lakh.

Figure 3.18:Distribution of non-routine expenditure bycategories of states

Low incomestates

Middle incomestates


High incomestates

56.8

1.212.2

3.4

26.4

44.7

5.56.1

14.2

29.5

49.1

8.5

7.3

8.6

26.5

100

90

80

70

60

50

40

30

20

10

0

No

n-r

ou

tin

eex

pen

dit

ure

(%)

Figure 3.17:Distribution of routine expenditure bycategories of states

Low incomestates

Middle incomestates


High incomestates

56.4

9.5

6.35.37.4

7.1

4.04.1

49.5

9.9

6.95.0

11.7

7.6

5.04.4

45.3

12.8

8.04.4

10.7

7.5

5.16.1

100

90

80

70

60

50

40

30

20

10

0

Ro

uti

ne

exp

end

itu

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)


Expenditure on housing, which is 4.7 per cent at the

all-India level, is a higher 5.4 per cent in the case of

households in towns with more than 5 lakh population

and this rises to 6.4 per cent in towns with more than

10 lakh population. Health expenditure falls from 5.2

per cent to 4.2 per cent. There is no major difference

in the proportion of non-routine expenditure across

various town groups.

3.7 OWNERSHIP OF CONSUMER DURABLES

Not surprisingly, the difference that is seen between

rural and urban households is also reflected in the

ownership profile of most consumer durables. For

instance, in the lower category of durables like pressure

cookers and ceiling fans, urban ownership levels are

much higher than those for rural areas. Just 38 per cent

of rural households, for instance, own a pressure

cooker/pan as compared with 80.4 per cent for urban

areas. It is 48 per cent versus 89 per cent in the case of

fans, perhaps also a reflection of the availability of

electricity in rural India. For items like wrist watches and

bicycles, where electricity is not needed, the difference

in rural and urban consumption is not as stark – 76 per

cent versus 87.9 per cent in the case of wrist watches

and 69.1 versus 52.9 per cent in the case of bicycles.

More than10 lakh

Figure 3.21:Distribution of non-routine expenditureby size of town

5-10 lakh


Less than5 lakh

44.9

7.8

7.8

14.7

24.8

45.9

5.0

16.0

12.3

20.8

44.6

4.4

12.9

11.7

26.4

100

90

80

70

60

50

40

30

20

10

0

No

n-r

ou

tin

eex

pen

dit

ure

(%)

Figure 3.20:Distribution of routine expenditure by sizeof town

More than10 lakh

5-10 lakh


Less than5 lakh

44.9

4.9

13.0

6.98.4

11.3

4.26.4

44.8

5.0

12.2

6.6

10.8

10.64.45.5

46.4

5.2

11.9

6.78.4

10.9

5.25.4

100

90

80

70

60

50

40

30

20

10

0

Ro

uti

ne

exp

end

itu

re(%

)


Among the medium category of consumer durables -

that includes small black-and-white television sets,

regular black-and-white television sets, geysers,

sewing machines, vacuum cleaners and mixer-grinders

– penetration levels are still quite low and the potential

for growth is enormous. Just 35 per cent of all

households in India have mixer-grinders, with more

urban homes (56 per cent) compared to rural homes

(19 per cent) owning these gadgets.

Ownership of high-end consumer products — such as

colour TVs (regular and small), VCRs and VCPs, scooters,

mopeds, motorcycles, refrigerators, washing machines,

music systems and cars/jeeps — is still limited. But for

certain products, the share is growing. Regular colour

TVs, for instance, have penetrated a third of Indian

homes, with ownership being significantly higher in

urban households — at 54 per cent. In rural areas, the

penetration of colour TVs is just about 17 per cent.

Motorcycle ownership, too, is growing steadily with

nearly 26 per cent Indian homes boasting of one.

Nearly a third of all urban homes (34 per cent) and 19

per cent rural homes own a motorcycle. For cars, the

figures are 3.2 per cent for rural area versus 11.9 per

cent for urban areas.

Figure 3.22:Ownership of consumer durable

Urban Rural

0 100

123Car

3419

Motorcycle

5417

ColourTelevision(Regular)

5619

Mixer/Grinder

8948Ceiling Fan

8876

Wrist watch

5369Bicycle

8038

Pressurecooker

4020 60 80% of households own consumer goods


Financial vulnerability may be defined as a state of

financial well-being of households that results from

the pursuit of “unsustainable livelihoods”. In other

words, financially vulnerable households are no

longer able to meet their financial needs. This can

happen on account of two reasons – households lack

access to key productive assets; and/or due to

unwise financial management. In the present

context, a household is characterised as financial

vulnerable if its total reported income is less than its

total (routine and non-routine) expenditure.

If we follow the above criteria, we find that one-

fourth of Indian families (51 million households

equivalent to about 262 million persons) are

financially vulnerable. In other words, the income of

around 25 per cent of Indian households are below

their total expenditure and these household are

unable to meet their needs through the financial

resources at their disposal. Approximately three-

fourth of such households is located in rural India.

The level of income of financially vulnerable

households is a little more than half of the non-

vulnerable households. While the average household

income of vulnerable households is Rs 40,450, it rises

to Rs 73,082 in the case of non-vulnerable

households. Despite low income, vulnerable

households spend a lot more than non-vulnerable

households. As a result, an average vulnerable

household is left with a negative surplus income to

save and invest as opposed to the non-vulnerable

households. Expenses on weddings and other social

ceremonies account for around 57 per cent of all

non-routine expenses in the case of vulnerable

households and this falls to 31 per cent for non-

vulnerable households.

The level of income is an important determinant of

financial vulnerability. As per this survey, a majority of

vulnerable households – two-third in rural and urban

India each – belong to the bottom two income

quintiles (Q1 and Q2). Hardly one-third of non-

vulnerable households belong to these income quintile

groups. While 40 per cent of vulnerable households

reported an outstanding loan, this share in the case

of non-vulnerable households was only 18 per cent.

Occupation levels vary significantly across financially

vulnerable households and non-vulnerable

households. Labourers constitute the largest

segment of the vulnerable population, comprising

over 43 per cent of the vulnerable households. The

salaried account for 21.5 per cent of the non-

vulnerable households. Just around 10 per cent of the

vulnerable households earn their living through

ESTIMATES OF FINANCIAL VULNERABILITY

salary/wages. Interestingly, other socio-economic and

demographic characteristics such as education level

and age of chief earners, size of landholdings and

even ownership of high-end products etc, have not

shown much impact on vulnerability. For instance,

while 28 per cent of landless households are

financially vulnerable, this share for medium and large

farmers is 23 per cent each. Similarly, ownership of

selected consumer goods does not vary significantly

across vulnerable and non-vulnerable households, as

illustrated in the graphs above.

This clearly indicates that the state of vulnerability

is not limited to poor households. Even prosperous

households can be financially vulnerable. Though it is

possible for such households to earn more as the

economy gathers momentum, their earnings might

still not be sufficient to cover their increased needs

and, therefore, they may remain financially

vulnerable. Further analysis of data indicates that

majority of vulnerable households are not able to

manage their unplanned expenditure through

current savings. This also suggests that such

households do not plan their future, nor do they

save long-term.

While governments have a role to play for the

poorest households, in general, financial security is

the prerogative of each household. They need to be

wiser and financially prude in order to meet their

needs. The findings of the survey also suggest that

the government as well as industry need to work

pragmatically in order to develop more focused

campaigns and improved, need-based financial

instruments that are tailor-made for Indian

households in order to remove vulnerability.

India Financial Protection Survey42


CHAPTER 4HOW INDIA SAVES

4.1 SAVING PATTERN OF INDIAN HOUSEHOLDS

A. Urban India saves more

Household saving rates in India have always been high.

If overall savings rates have picked up in recent years,

it is more to do with the fact that government-level

dissavings have reduced over time. Survey results

reveal that around 81.4 per cent of households at the

all-India level save some part of their earnings – the

figure is 88 per cent for urban India and 78.5 per cent

for rural India.

The Survey shows that rural households had an average

income of Rs 51,922 in 2004-05 and urban ones Rs

95,827. Of this, routine and non-routine expenses added

up to Rs 40,309 for rural households and Rs 69,065 for

urban households. This means share of surplus income2

is around 22 per cent in rural areas and 28 per cent for

urban areas. Of the surplus income, around 10-15 per

1Financial instruments include investment made in stock market, small savings and life insurance only for the year 2004-05.2Surplus income = Total household income – expenditure (routine + non-routine). In this report, ‘savings’ is frequently used as a synonym to ‘surplus income’for better readability.

While lack of social security systemin India is viewed as negative, it has a

positive impact on saving habits of Indian households. Over 80 per cent of

Indians save. A majority saves for emergencies or for their children’s

education. These two reasons top even the need to save for old age. Less than

a fourth of these savings find their way into financial instruments1, with the

rest being kept at home in cash or in a bank deposits. As with most

parameters concerning incomes and expenditures, savings habits too change

with age and education – the older and the more educated appreciate the

need for old age protection more, as do those with higher income levels. A

fourth of Indian households own life insurance policies and, as in the case of

savings, these increase with age of the chief earning member as well as with

his/her income and education levels. While two thirds of all savings are kept

in the form of liquid assets – in cash, in the bank and in post office deposits

– around a fifth of all investments are in the form of premium on insurance

policies, as compared to just 7 per cent in the case of shares/debentures.


cent was invested in financial instruments (except bank

deposits) in both rural and urban India.

Insurance has a wide reach. Among all financial

instruments, savings in the form of insurance are the

highest, beating those in shares/debentures and even

those in the post office. While investment in insurance

is higher in urban areas (in both absolute terms and

relative to overall investments), the trend is the same

even in rural areas.

B. Salaried class saves the most, labour class saves

the least

Salaried employees comprise just 18 per cent of

households in the country, but account for the

greatest proportion of savings as they have the

highest level of income (Rs 108,620 per annum) and

the highest levels of savings from it (33 per cent).

Around 2.7 per cent of salaried households tend to

invest in shares and debentures – this is a lower 2.3

per cent in the case of business households. Around

8.3 per cent of salaried households tend to invest in

insurance, the highest in any category.

The self-employed in non-agricultural activities

(professionals and business class) form the next largest

pool of savings. They account for 17 per cent of the

country’s households, but have the second-highest

average income (Rs 95,316 per annum) and a

reasonably high savings rate (31 per cent).

Households headed by the salaried allocate more than

a fourth of their total investments for paying insurance

premium as compared to a much lower 6.4 per cent

for purehousing shares and debentures.

C. The educated save more

Households headed by graduates tend to have amongst

the highest levels of savings in both absolute terms (Rs

43,294 per annum) as well as relative to income (33 per

cent). Such families account for just 13 per cent of the

total, but account for nearly 35 per cent of total


household savings. Households headed by those who’ve

studied till higher secondary (12th class) account for 47

per cent of the total number of households and 43 per

cent of total savings – average savings in this group are

Rs 16,518 per household, or 25 per cent of income.

Not surprisingly, graduate households tend to spend a

lot more of their investments in buying insurance (28.2

per cent as compared to the all-India average of 21.6 per

cent). On an average, 3.5 per cent of all graduate

households tend to invest in shares/debentures (for the

illiterate households the corresponding figure is just 0.3

per cent; while the all-India average is 1.1 per cent) and

around 10.2 per cent of these households tend to invest

in insurance policies (for illiterate households, the

corresponding figure is 1.3 per cent, while that for all

India is 3.9 per cent).

D. Savings are higher in late middle age

As the chief earner (across households) gets older,

two aspects are noticed. Firstly, the motivation to

save tends to change. Increasingly, the household

feels the need to save for the old-age. In addition, the

levels of savings rise with age.

Households whose chief earner is in the 36-45 age

group form the bulk of the total number of

households in the country (36 per cent) while those

in the 26-35 age group are the next most important

(26 per cent) category by size. The highest savings (in

terms of per household) are in the 56-65 age group

where savings are Rs 21,196 per household, or 25 per

cent of the annual income.

While 57 per cent of this is kept in the form of liquid

savings, this group tends to invest the most in

shares/debentures. However, given the age profile,

investments in insurance are lower in this group. Of

the total investments made, just 13 per cent are in

form of insurance premium. Households in the 26-35

age group, by contrast, spend around 23.6 per cent of

their total investments in paying insurance premium.

E. Landless households also save

The landless form the bulk (40 per cent) of the

total households in the country and this group saves

the least, at Rs 7,608 per annum. This group also

invests the most (23 per cent), in relative terms, of its

savings in financial instruments (other than bank

deposits).

Though the group that owns more than 10 acres of

land earns and saves the most (30 per cent of income

is saved), they account for the least savings due to

their relative small number. The farmer with medium

landholding is the most promising from the point of

view of savings-24 per cent of income is saved and

around a fifth of this finds its way into financial

instruments (other than in bank deposits).


F. Poor households save despite being in debt

Of the quintiles, not surprisingly, the top-most one

contributes the most to the country’s savings pool –

with an average income of Rs 163,465 per annum, this

group saves around 45 per cent of its income.

Surprisingly, it chooses to keep nearly 80 per cent of it

in liquid savings - like banks (53 per cent), at home (16

per cent), in post office deposits (nearly 2 per cent) -

and invests just around 9 per cent of its savings in

financial instruments such as stocks, small savings and

life insurance.

G. Middle income states invest more in life insurance

Though around 45 per cent of India’s population lives

in low income states and another one-third in middle

income states, it is the high income states that

account for the largest savings in the country. The

average income of households in these states is

Rs 90,285, of which around 38 per cent is saved.

While the high income states invest the most in

shares/debentures, it is the middle income states that

invest the most in insurance premium (in relative

terms). Of the total amount invested, the average

household in middle income states spends around 27

per cent on insurance premium each year.

H. The larger the town, higher the savings

In keeping with the overall pattern of change that is

associated with urbanisation, big towns tend to have

the highest average household income as well as

savings, in both relative and absolute terms. Savings

rate in cities (with a population of more than a million)

is around 32 per cent as compared to around 26 per

cent for smaller cities, or cities that have a population

of less than five lakh.

Larger cities also tend to invest more in financial

instruments and around 3.8 per cent of households in

such cities tend of invest in shares/debentures in

comparison with 1.2 per cent in the smaller cities (with

less than 5 lakh population).


4.2 WHY DO INDIANS SAVE?

A. Over 80 per cent of Indian households save for

emergencies

Indian households have different reasons for keeping

away some money as savings – ranging from

emergencies to marriages and social events, children’s

education and gifting. Though India does not have

even a rudimentary social security scheme, saving for

old age is not the most important reason why Indian

households save. Saving for emergencies is the top-

most priority for Indian households with 83 per cent

households saving for this purpose. Children’s

education is another key priority and almost 81 per

cent households save to meet this need.

Nearly 69 per cent households in India save for old age

financial security whereas 63 per cent households save

to meet future expenses towards marriages, births

and other social ceremonies. Nearly 47 per cent

households saves to buy or build a house and a similar

percentage save to improve or enlarge their business.

Almost 22 per cent households save to buy consumer

durables and 18 per cent to meet expenses towards

gifting, donations and pilgrimages

B. Priorities for savings are invariant

of occupation type

There is little difference when it comes to priorities for

savings – emergencies, children’s education and old

age, in that order – between the salary earners, the

agriculturists, labourers or even the self-employed.

When it comes to savings there is little difference in

the way the households prioritise their savings (be it

salary earners, agriculturists, labourers or the self-

employed). While saving to buy a house takes

precedence over enlarging the business in the case of

most households, priorities of the self-employed in

non-agriculture differ from the rest. In this category

74% households would prefer to save to enlarge their

business as compared to 49.6% households who would

like to save to buy a house.


C. Savings for old age is more a phenomenon with

educated Indians

Even households headed by graduates tend to savemore

for emergencies and for their children’s education than

they do for their old age. Thus, 87.8 per cent of graduate

households say they save for emergencies, 88.9 per cent

for their children’s education and a much lower 76 per

cent for their old age. While the order of magnitude is

different from those for households headed by an

illiterate, there is little relative change. Thus, illiterate

households list their top priority as emergencies (79.2

per cent), followed by education of their children (72.1

per cent) and saving for old age (66 per cent). Saving to

buy a house figures lower down the list, with just 52.1

per cent of graduate households citing this as a reason to

save and around 40.1 per cent of illiterate households

feeling the same way.

D. Savings for social ceremonies is more common

in rural India

Weddings, births, social events and ceremonies have a

special place in the lives of Indian families. Not

surprisingly, 63 per cent of households save for social

ceremonies with 64 per cent of rural households saving

specifically for this reason versus 60 per cent of urban

households. Across all chief-earner age and education

groups, the percentage of households saving for social

occasions is more or less similar - in the 60 to 64 per cent

range. Also, more households with larger landholdings

(over 4 acres) tend to save for such occasions than those

in the other landholding categories.

E. Saving to buy a house is higher in urban India

The percentage of households saving to buy a house is

slightly higher in urban India (51 per cent) compared to

rural India (45 per cent). Across all chief-earner age

groups, the percentage of households saving to buy or

build a house is more or less similar. The impulse for

saving under this head appears to be partly determined

by education - 52 per cent of households with graduate

chief-earners save to buy a house compared with 40 per

cent of households with illiterate chief earners.

Major source of household income also determine the

propensity to save for building or buying a house. More

salaried households and households engaged in non-

agricultural self-employment (52 per cent and 50 per

cent respectively) are saving to build/buy houses as

compared to the labour class (43 per cent) and

agricultural households (46 per cent).

4.3 PREFERRED MODE OF SAVING

A. 36% of Indian households keep their

savings at home

Bank deposits and keeping money at home emerge as

the preferred modes of saving surplus income. More

than half of Indian households (51 per cent) prefer to

save by keeping their savings in bank deposits. Almost

36 per cent prefer to keep it at home. Households

opting for post-office deposits account for just 5 per

cent. Cooperative society deposits, chit funds,

purchasing bonds are some of the other modes of

saving. Only 2 per cent households opt for purchasing

insurance policies.


B. Bank deposits are the most preferred form of

saving for the salaried and rich

Households whose chief earners are labourers have

the highest tendency to keep their cash at home (58.3

per cent) while those who are salaried have the lowest

tendency to do this (19.8 per cent). The behaviour

with respect to bank deposits follows the reverse

pattern.

Households whose chief earners are below 25 years

have the highest tendency to save their money in the

form of cash at home. They have the lowest tendency

to save it in a bank account. As the chief earner grows

older, however, things change considerably. Just 39

per cent of households whose chief earner is in the

next age group (26-35 years), for instance, keep their

savings in the form of cash at home, and this falls to

28.8 per cent in the case of those in the 56-65 age

group, but rises in the next age group. When it comes

to bank deposits, while 41 per cent of the below-25

year households hold their savings in a bank account,

this rises to 47.6 in the 26-35 age group and to 59.7

per cent in the 56-65 age group.

Landless households have the highest tendency to

save their money in the form of cash at home, and the

lowest tendency to save it in a bank account. While

51.6 per cent of them kept their meager savings in the

form of cash at home, this figure fell to just 28.4 per

cent for large farmers. Nearly 60 per cent in this group

keep their savings in the bank.

Households in the lower income quintiles and more so

in rural areas, have the highest tendency to save their

money in the form of cash. So, 58 per cent households

in the bottom-most income quintile (Q1) keep their

savings at home in the form of cash (30.5 per cent put

it in the bank and another 5 per cent in post office

accounts) and this falls to 20.3 per cent in the top-

most income quintile (and rises to 68.1 per cent

households putting their money in banks and around

3.0 per cent in the post office).


4.4 SAVINGS-RELATED HOUSEHOLD BEHAVIOURS

A. Owning an account in a financial institution3

Owning an account in a financial institution is

determined as much by the source of income as by the

age and education of the chief earner. Predictably,

fewer rural Indians hold accounts in any financial

institution as opposed to urban Indians. At an all-India,

66% of households own accounts in a financial

institution, with percentages pegged at 59% for rural

India and 82% for urban India. Similarly, 44.1 per cent

of the landless have an account in a financial

institution, the figure rises to as high as 87.7 per cent

in the case of large farmers.

Not surprisingly, households whose chief earners are

labourers tend to keep their money in cash and just

38.4 per cent of them have an account in a financial

institution. Households headed by chief earners who

have a regular income have the highest tendency to

hold an account, and just under 91 per cent of them

have an account in a financial institution.

Households whose chief earner is below the age of 25

tend to be the most casual in terms of their attitude

towards long-term savings. While just 51.3 per cent of

such households have an account in a financial

institution, this rises to 60.2 per cent in the case of

households whose chief earner is between 26 and 35

years of age, and finally to 77.1 per cent where the

chief earner is above the age of 65.

Households whose chief earners are relatively

uneducated also tend to have a smaller number of

accounts in financial institutions. Just 40.5 per cent of

illiterate households have an account in a financial

institution as compared to 53.8 per cent in the case of

households whose chief earner had studied up to

primary school. This then goes up to 95.1 per cent in

the case of graduate households.

B. Outstanding loans

A fourth of all Indians have outstanding loans, and the

figure is a fifth for urban areas and a fourth for rural

areas. There are variations to this theme, especially in

terms of education and occupation levels of the chief

3 Financial institution include commercial banks, post office, regional rural banks, registered societies, etc.


earner, land ownership etc.

Households where the chief earner is self-employed in

agriculture tend to be the most indebted. Over 27 per

cent of such households have an outstanding loan, as

compared to a much lower 17.6 per cent for

households where the chief earner gets a regular

salary. A little over a fourth of households headed by

labourers tend to have outstanding loans. Over 26 per

cent of households whose chief earner is illiterate tend

to have outstanding loans as compared to 18.8 per

cent in the case of households whose chief earners are

graduates or more.

Though it sounds counter-intuitive, it is the landless that

have the least outstanding loans and the landed that

have the most. One reason behind this finding could be

the fact that the landless have less reasons to borrow as

compared to the landed; and two, the collateral they

offer is so low that few are willing to lend to them

money. Around 23 per cent of the landless in the

country have outstanding loans, and the figure goes up

to 25.1 per cent in the case of those who have between

0.1 and 2 acres of land, and to 35.5 per cent in the case

of those who have more than 10 acres of land.

4.4 COPING WITH ECONOMIC HARDSHIP

Indeed, in the case of various economic hardships

including the death of the chief earner and major

illnesses in the family, the normal way to cope with

such eventualities has been to draw down on personal

savings. The urban-rural split: 58 per cent urban

households and 54 per cent rural households took

recourse to personal savings. Almost a fourth of all

Indian households opted for a loan from a friend or a

relative to tide over the financial crunch.

Regular salary earner households too were in the

majority when it came to using their own savings (65

per cent) followed by non-agriculture households (64

per cent) and agricultural households (59 per cent) and

labour households (43 per cent). More agricultural and

labour households also sold off their assets to deal

with the crisis (8 per cent each).

Nearly 69 per cent of large farmers used their own

savings during this period compared to just 46 per

cent of landless households. About 7 per cent

households sold some asset – such as land, house,

jewellery, etc – to overcome the financial crunch. More

rural households (9 per cent) as against urban

households (4 per cent) went in for this measure.

Loan from the employer is another means that

households resort to in such a situation with 1 per cent

of households resorting to this measure. A slightly

higher percentage of urban households (2 per cent)

opted for this measure as against rural households

(1 per cent).

4.5 HOUSEHOLDS’ PERCEPTIONS

ABOUT FINANCIAL SECURITY

A. Confidence in stability of the source of income

The main reason why Indians tend to save for

emergencies and not for their old age is that, by and

large, they are quite confident of their ability to live

off their savings after retirement and to be able to find

another job within months of losing the current one.


At the all-India level, 12.8 per cent of households said

they were very confident about the stability of their

household income, and another 41 per cent said they

were confident. Another 30 per cent were less

confident and not confident at all, and another 15.1

per cent did not indicate anything. A large reason

behind this may also be the feeling that family and

children will be there to look after any exigency. While

half of those in rural India are either very confident or

confident of the stability of their income, the figure is

63 per cent for urban India.

While there are large differences across various socio-

economic groups, the broad trend is the same – a lot

more people are confident than those who are not. At

the aggregate level, around 44.5 per cent of

households headed by those under the age of 25 tend

to be confident about the stability of their income and

this rises to 61.1 per cent in the case of households

headed by those in the 56-65 age group. Around

39.3 per cent of illiterates are confident and the

number rises to 78.6 per cent in the case of graduates.

While three-fourths of salaried households are

confident about their financial stability, only 11 per

cent, 5 per cent and 9 per cent such households say

they are "less confident", "least confident" or "totally

uncertain", respectively. More labour and agricultural

households than those in the non-agricultural sector

are "less/least confidence" or are totally unsure about

their financial security. For instance, the percentages

among the labour group are: 26 per cent are "less

confident", 20 per cent "least confident" and 21 per

cent "totally unsure". Similarly, among those

households whose chief earner is self-employed in the

agricultural sector, 26 per cent are less confident,

20 per cent are least confident and 22 per cent totally

unsure about their financial sources.

Expectedly, households with large landholdings are

"confident" or "most confident" about their financial

security. Nearly half of households owning more than

10 acres of land (45 per cent) say they are "confident"

and a quarter (25 per cent) say they are "most

confident". Among households that have medium and

marginal landholdings, the confidence level is quite high

- 49 per cent were "confident" and 18 per cent were

"most confident". Surprisingly, even among landless

households, high percentages were relatively upbeat

about their financial security - 33 per cent were


"confident" and 8 per cent "most confident" about their

future financial status. However, the landless group had

more households than the other groups who said they

were less "confident", "least confident" or "totally

uncertain" about their financial stability - 23 per cent,

18 per cent and 19 per cent respectively.

B. Time to recover in case of loss of income source

The time households perceive it will take them to

recover from a loss of income, as opposed to their

level of confidence about the stability of their income

is a clear indicator of the kind of financial planning

most Indian households undertake. Interestingly,

34 per cent of Indian households believe it will take

them less than six months to be able to replace their

current incomes in the case of a disruption and

another 21 per cent feel it will take a year. Therefore,

around 55 per cent of Indian households feel it will

take less than a year to recover from a loss of income,

a figure that is relatively equal to the number that feel

very confident/confident about their future.

Since the interest income on financial instruments are

not enough to sustain a year’s living without income,

it means a large number of those who are very

confident/confident about the stability of their income

plan to draw down on their savings, leaving less for

their post-retirement life. While the figures vary across

different socio-economic groupings, the broad trend is

the same – the majority believes they can restore their

current levels of income within a year of any change

for the worse.

Almost 39 per cent agricultural households claim they

will be able to find alternative income within six

months compared to 34 per cent regular salary

earning households, 37 per cent households each

engaged in self employment in non-agricultural and

labour activities. On the other hand, more agricultural

households and labour households are unable to

suggest a time-frame within which they will be able to

find alternative income (41 and 40 per cent

respectively) versus 30 per cent non-agricultural

households and 33 per cent regular salary earning

households.

Nearly 38 per cent of households with chief earners who

are graduates (or more educated than that) express

confidence that they will be able to find alternative

income within six months. This is only slightly higher

than for the other groups. More illiterate households

are unsure of the time-frame in which they would be

able to find alternative income (41 per cent) compared

to graduate (or more educated than that) households

(30 per cent). More households with earners who are

graduates and above claim they would be able to find

alternative income (25 per cent) within a year, compared

to illiterate households (16 per cent).

Landless households are the most upbeat about

finding alternative income within six months (36 per

cent) compared to 33 per cent for large farmers. Also,

Figure 4.14:Time to recover in case of loss of incomesource

UrbanRural

LargeMedium

SmallMarginalLandless

Graduate+Upto Higher Secondary

Upto PrimaryIlliterate

Self employmentin agriculture

Regular salary/wages

1.10.7

1.00.50.60.50.9

0.71.00.80.8

Less than 6 months One yearTwo year Can�t say Others

1.1

1.1

0.7

0.9

35.9 22.3 6.9 33.833.2 20.3 8.5 37.3

33.2 20.0 10.4 35.431.0 22.8 11.8 34.030.9 21.6 11.6 35.331.9 22.0 8.7 37.035.7 17.9 6.1 39.4

37.4 24.5 7.1 30.333.2 21.9 8.5 35.532.7 21.2 8.4 36.934.8 16.0 7.1 41.3

36.6 16.3 5.7 40.2

38.7 14.7 4.2 41.2

37.1 24.3 8.3 29.5

34.3 23.8 8 33

Labour

Self employmentin non-agriculture

0% of households

100604020 80


more landless households are uncertain about when

they will be able to find alternative income (39 per

cent). However the variance among the other groups

is not very much.

C. Sustainability on current savings in case of loss of

income source

The possibility that households will draw down on

current savings to meet routine expenditure in case of

a sudden drop in income levels is borne out of the fact

that about 4 per cent of households said that if they lost

their major source of household income, they could

sustain themselves beyond a year – while the proportion

differs across various socio-economic groups.

Hardly one per cent of households that depend on

labour and agriculture as the main sources of income

can sustain themselves for more than a year on their

savings as compared to 7 per cent for self-employed in

non-agricultural activities and 9 per cent for regular

salary earning households.

Stretching the savings to last beyond 12 months

becomes more of a problem for households that are

lower down on the education scale. For instance, as in

case of labour, one per cent households whose chief

earners are illiterate can sustain themselves for this

period, compared to 2 per cent primary-educated

chief earner households, 4 per cent higher-secondary

educated chief earner households and 11 per cent

households who are graduates (or more educated

than that) as chief earners.

Most landless households (86 per cent) can sustain

themselves for up to six months while only 2 per cent

can sustain themselves beyond 12 months. The

proportion of large farmers being able to stretch their

savings to last them beyond 12months is just 9 per cent.

D. Misplaced financial optimism

The study clearly brings out that India is a country of

optimists when it comes to financial security. More

than half the Indian households (54 per cent) were

confident about their current and future stability.

Unfortunately, the survey highlights that this financial

optimism is not based on facts. An overwhelming 96

per cent of households feel that they cannot survive

for more than one year on their current savings in case

of loss of a major source of household income and yet

54 per cent households feel that they are financially

secure. Financially at risk urban Indians appear to be

even more optimistic than their rural counterparts.

This clearly indicates that Indians do not take a long-

term view of their financial security and hence their

optimism is misplaced and there is a pressing need for

financial literacy for better understanding of their

Figure 4.15:Sustainability on current savings

Less than 6 months 6-12More than 12 months Can�t say

44.4 25.8 5.9 23.842.6 14.5 2.8 40.2

46.8 24.2 9.3 19.753.5 17.3 5.2 23.954.6 11.8 4.2 29.350.1 7.1 2.1 40.642.5 5.4 1.7 50.4

40.9 29.3 7.1 22.736.5 38.5 10.6 14.545.0 20.6 4 30.443.7 12 1.9 42.438 7.2 1.2 53.6

43.6 28.1 5.4 22.939.5 6.1 0.6 53.7

37.3 5.7 0.7 56.3

44.4 26.9 6.8 21.9

39.9 35.3 8.6 16.2

UrbanRural

LargeMedium

SmallMarginalLandless

OthersGraduate+

Upto Higher SecondaryUpto Primary

Illiterate

Self employmentin agriculture

Regular salary/wages

Others

Self employmentin non-agriculture

Labour

0% of households

100604020 80


Information on where households are investing their

surplus income is important for service providers as

well as policy-makers. If the financial instruments (or

modes of investment) are easily substitutable, efforts

to increase investments in any one form will not

result in net addition to investment. Therefore, new

instruments that can attract additional investment

must be found in order to increase the total volume

of investment in the short-run. This survey attempts

to develop an indicative profile of households that

made an investment in the stock market, small

savings in post office and purchased life insurance

policies during 2004-05.

Although investments in these three financial

instruments are confined to a relatively small

proportion of households, it is expected to increase in

the near future, particularly in life insurance. At the

all-India level, investment in these financial

instruments accounts for about 3 per cent of the

estimated household income. Of these, investment

in stock market and small savings account for 0.5 per

cent each but for life insurance, the corresponding

figure is higher - at around 2 per cent. If we consider

the sub-set of households that invest in these

financial instruments, the proportion of such

investments to their household income is

significantly higher. For instance, investors in the

stock market invest about 22 per cent of their

household income compared to 14 per cent in the

case of small savings and 4 per cent for life insurance.

Occupation levels vary significantly across investing

households. As per this survey, the salaried class

(comprising 18.4 per cent of the total households in

the country) accounts for the highest proportion

(over 40 per cent) of investing households,

irrespective of the modes of investment considered

here. Similarly, while the non-agricultural self-

employed account for 35 per cent of investors in the

stock market, they account for 26 per cent of the life

insurance investors and 19 per cent of those who go

in for small savings. The self-employed in agriculture,

in contrast, account for 21 per cent of households that

invest in life insurance and small savings and 11 per

cent of households that invest in the stock market.

The investment pattern is observed to be a function

of the level education of a household’s chief earner. At

the all India level, while 14 per cent of the households

are headed by graduates, 59 per cent of investors in

the stock market are graduate households. Amongst

the insured population, 32 per cent are graduate

households. About half of households that invest in

life insurance have studied up to higher secondary.

This figure reduces to 44 per cent for small savings

and 38 per cent for the stock market.

Income is one of the important determinants of

investment. Thus it is worthwhile to study the

earning, spending and saving patterns of households

that invest. The average Indian household had an

PROFILE OF INVESTORS


annual income of Rs 65,041 in 2004-05, and an

expenditure of Rs 48,902, leaving it with Rs 16,139 to

save and invest. However, the findings of the survey

reveal that investing households are fairly better-off

than average Indians. For instance, investors in stock

market have the highest income level — at Rs 159,901

versus Rs 132,030 and Rs 113,190 in the case of

investors in small savings and life insurance

respectively. This indicates that earnings of investing

households is approximately double that of the

national average.

Similarly, expenses of households that invest in the

stockmarket are also significantly higher - at Rs 87,317

per annum versus Rs 63,830 per annum for life

insurance investors. While non-routine expenditure

accounts for around 15 per cent of income in the case

of investors in the stock market, the figure is

marginally lower at 13 per cent for households opting

for other modes of investment. For the country as a

whole, it is 12.2 per cent. Therefore, the average stock

market investor saves comparativelymore than others.

The survey also reveals that households that invest in

the stock market allocate about 22 per cent of their

income to the stockmarket – or Rs 34,789 per annum.

Similarly, insurance policy holders make a payment of

Rs 5,007 per annum towards life insurance, which is

significantly lower than the proportion of investment

(to income) made by investors in the stock market.

Also, it is interesting to note that households investing

in the stock market as well as in small savings also

invest a fair amount of their income in life insurance.

This indicates that investment in insurance is a more

widespread and popular phenomenon in India, as

opposed to the other two avenues of the investment

considered here.


CHAPTER 5LIFE INSURANCE

This chapter examines premium payments, as well as

the various characteristics of an insured and an

uninsured household. The idea is to learn more about

the two groups, while examining the possibility of

increasing the volume of savings in the form of

insurance for the household sector as a whole.

Both the absolute value of premium payments made

and the premium-income ratio (premium payments as

a percentage of disposable income) are studied in

relation to a number of socio-economic factors like

household income, education, occupation, age of the

chief earner etc.

An attempt has also been made to examine the

important characteristics of households, based on

their socio-economic profile, and to understand the

impact of factors such as the attitude of (insured and

uninsured) households towards spending, saving and

investments.

For the purpose of micro analysis or analysis at the

household level, the actual contribution towards

insurance made by a household is of great interest.

Sample surveys (such as the one attempted here) are

practically the only source of data for an analysis of the

distribution and ownership of life insurance and

premium payments.

5.1 AWARENESS ABOUT LIFE INSURANCE

A. Urban India is far more aware of life insurance

than rural India

The awareness of life insurance stands at a high 78 per

cent on an all-India level with more urban households

(90 per cent) aware about it than rural households (73

per cent). The trends are broadly the same -- the level of

awareness increases with education, age and income

levels. For instance, a very high percentage of

households (96 per cent) that has chief earners who are

graduates and above are aware about life insurance. In

contrast, 60 per cent illiterate chief earner households

The awareness about insurance is quite high in India. Around 78 per cent

households are aware of insurance products. However, ownership of

insurance products is low - only 24 per cent households in the country own a

life insurance cover. Those households owning life insurance tend to be more

prosperous, more educated, and own more consumer durables than those

that do not own life insurance. It is the salaried class that tends to buy the

most life insurance, followed by the businessmen. Predictably, it is the

married who tend to buy life insurance more. At the all-India level, for all

households, while the average sum assured of a life insurance policy in the

country is Rs 27,951, the average premium paid is Rs 1,227 and this

represents 4 per cent of the household disposable income. If, however, the

insured households alone are considered, their average premium payments

work out to Rs 5,007, with the sum assured of Rs 114,450.


are aware about life insurance. Nearly 71 per cent

among primary educated chief earner households and

84 per cent among higher secondary educated

households know about life insurance.

B. Life insurance awareness highest amongst the

salaried class

Nearly 96 per cent households that have a regular

salary as a source of income are aware about life

insurance compared to 89 per cent households that

are engaged in non-agricultural self-employed work

followed by agricultural households (77 per cent) and

labour households (63 per cent).

C. Life insurance awareness is function of age

The awareness level among households across all age-

groups are more or less similar with slightly more

households that have a chief earner in the age groups

of 46-55 years, 56-65 years and 65+ years more aware

(81 per cent each) about life insurance than the

younger age groups.

D. The larger the landholding, the higher the

awareness

Households that have larger landholdings are more

aware of life insurance than those with relatively

smaller landholdings or those who are landless: only

66 per cent of households among the landless and 72

per cent among marginal farmers (0.1-2 acres) are

aware of life insurance. This percentage rises to 86 per

cent and 87 per cent among medium (4-10 acres of

land) and large (10-plus acres) farmers respectively.

E. Life insurance awareness increases as we move

up the income levels

Awareness of life insurance is largely linked to income

levels. The survey found better-off households to be

more aware of life insurance. Nearly 90 per cent of the

top income quintile group (Q5) and 81 per cent in the

60-80 per cent income quintile group (Q4) in rural India

are aware of life insurance products. The awareness

decreases as we go down the income quintile

hierarchy with just 55 per cent of households in the

lowest income quintile group (Q1) aware of life

insurance.

The percentage of households across all income quintile

groups that are aware of life insurance products is

higher in urban India. Nearly 76 per cent of households


in the lowest income quintile group (Q1) and 98 per cent

of households in the top income quintile group (Q5) in

urban India are aware of life insurance.

5.2 OWNERSHIP PATTERN OF LIFE INSURANCE

At an all-India level, about 86 per cent of households

aware about the insurance considered life insurance

as the most important product among all other

insurance products such as health (6 per cent), crop (3

per cent) and automobile (5 per cent) insurance. This

is broadly the trend across other socio-economic

parameters as well.

A quarter of all households (24 per cent) own life

insurance at the aggregate level. In low-income states

fewer households (18 per cent) compared to mid-

income and high-income states (30 per cent each) own

life insurance. Conversely, more households in low-

income states (82 per cent) than those in mid and

high-income states (70 per cent each) do not own life

insurance.

More urban households (38 per cent) than rural (19

per cent) own life insurance products. While doing an

all-India analysis of households owning life insurance,

it was found that all urban centers, including the

metros, were below the 50 per cent mark in terms of

the proportion of households that own a life Insurance

policy. As in the case of awareness about life insurance,

major source of household income, the level of

education, age of chief earner, level of household

income etc, determine the ownership pattern.

A. Life insurance ownership and occupation

The ownership of life insurance is largely influenced by

the major source of household earnings. Nearly 53 per

cent of regular salary-earning households own life

insurance, which reduces to 37 per cent in the case of

households where the chief earner is self-employed in

non-agricultural work. In contrast, just 18 per cent of

agriculturist and 7 per cent of labour households own

life insurance.

B. Life insurance ownership and education

Life insurance is also a function of education --

households where the chief earner is educated are

more likely to own a life insurance policy. For instance,

nearly 58 per cent households with chief earners who

are graduates or more educated than that own life

insurance against just 13 per cent and 9 per cent in the

case of primary-educated and illiterate households.

Nearly a quarter of all households that have chief

earners who have studied up to the higher secondary

level (26 per cent) are owners of life insurance.

C. Life insurance ownership and age of chief earner

Only 14 per cent households with chief earners less

than 25 years of age own life insurance compared to 22

per cent in the 26-35 age group and this goes up to 30

per cent in the age group of 46-55 years. Nearly 25 per

cent households in the 65+ years age group and 36-45

years age group each own life insurance products.


D. Life insurance ownership and

size of landholdings

Nearly 43 per cent of large farmers own life insurance

products. This only reinforces the fact that life

insurance ownership is directly proportionate to

affluence. Nearly 28 per cent of all households with

medium landholdings are life insurance owners.

Ownership of life insurance among households that

own small landholdings of 2-4 acres is 25 per cent.

Nearly 86 per cent of landless households and 85 per

cent of households with marginal landholdings,

respectively, do not possess insurance products.

E. Life insurance ownership and levels of income

Among the bottom 20 per cent income quintile group

in rural India(Q1), only 5 per cent own life insurance

compared to 13 per cent in this group in urban India.

Non-ownership of life insurance dominates among all

income quintile groups in rural India. Amongst the

rural top income quintile group (Q5), a little less than

half of the households (46 per cent) own insurance. In

contrast, in urban India more than half of the

households in Q4 (54 per cent) income quintile and 63

per cent among top income quintile (Q5) own life

insurance.

5.3 VALUE OF LIFE INSURANCE AND PREMIUMPAID

Life insurance in India is limited to a relatively small

group of households. Only 24 per cent of households

contribute to life insurance or are insured. Thus,

nearly three-fourth of Indian households is uninsured

and hence pays no premium at all. The average

premium payment for all households taken together

is Rs 1,227, with a sum assured of Rs 27,951. If,

however, the insured households alone are considered,

then their average premium payments work out to

Rs 5,007, with a sum assured of Rs 114,450.

The ratio of premium payments to income indicates

that the insured household is currently utilising about

4.4 per cent of disposable income towards insurance

premium payment as against about 1.9 per cent of

income for the entire household sector. There seems

to be a high positive correlation between the size of

the life insurance premium paid and the ratio of

premium payments to income, indicating that those

who pay higher premiums also pay, on an average, a

higher fraction of their income towards life insurance.

Given the income demographics and the overall

awareness of life insurance, it is not surprising that

urban premiums are more than rural premiums and

account for a higher percentage of household

income. The average sum assured of policies in urban

insured households is higher — at Rs 132,249 — with

a premium of Rs 6,634 compared to Rs 98,899 with

premium of Rs 3,560 for their rural counterparts.

Insured households in low-income states, on an

average, own policies with a sum assured of

Rs 117,744 and pay a premium of Rs 4,301.

Correspondingly, the average sum assured of a life

insurance policy for middle income states is

Rs 106,167 and the corresponding premium paid is

about Rs 5,166. High-income states, on the other

hand, own policies with the highest sum assured of

Rs 123,565 and they pay the highest premium of

about Rs 5,580.


Table 5.1:Value of insurance by location

RuralUrbanLow income statesMiddle income statesHigh income statesAll India

Share ofinsured

households %)

18.638.117.530.129.924.4

All households

Annualpremiumpaid (Rs)

6752,528754

1,5731,6621,227

Premium-incomeratio (%)

1.302.641.442.401.841.89

Sumassured ofpolicy (Rs)

18,38450,40120,58931,94336,92827,951

Insured households


3,5606,6344,3015,1665,5805,007


3.744.964.294.933.924.42


98,899132,249117,744106,167123,565114,450

Let us now examine to what extent the variability in

the size of premium payments to income can be

attributed to differences in the socio-economic,

demographic and other characteristics of households.

A.Value of life insurance and major occupation

Although anyone can buy a life insurance policy in

principle, it is seen that salary earning households and

households with self-employment in non-agricultural

activities tend to purchase life insurance products

more. The average premium paid is also higher for

these two top occupational groups regardless of

whether this average is computed for all households in

each of the occupational groups or only for insured

households. In the case of insured households, salaried

and self-employed pay the highest premium –

Rs 6,050 and Rs 5,938 respectively -- but as a share of

premium paid to income, their shares are lower at 5.0

and 4.5 per cent, respectively. Labour households that

are insured pay the lowest premium of Rs 2,649 with

the highest premium-income ratio of 6.1 per cent.

Similar patterns are observed in the case of the policy’s

sum assured. Salaried and business households own

policies of higher sum assured (Rs 127,098 and

Rs 125,370 respectively) compared to labour

households (Rs 72,874).

B.Value of life insurance and level of education

The level of education of the head of the household

clearly seems to influence life insurance ownership.

The proportion of insured households tends to rise

with education. So do the average premium and the

corresponding sum assured of policy for all

households as well as for those paying premiums. The

premium–income ratio also shows a clear tendency to

rise with education when all the households in

different educational groups are considered. The

variability in the premium-income ratio is, however,

Table 5.2:Value of insurance by major source of household income

Regular salary/ wagesSelf employment in non-agricultureSelf employment in agricultureLabour

Share ofinsured

households(%)

52.936.918.26.8

All households


3,2352,223572175


2.982.331.010.56


67,20446,24117,1374,990

Insured households


6,0505,9383,0402,649


4.724.543.146.11


127,098125,37094,31972,874


much less pronounced when only insured households

are considered. Premium payment for all households

headed by persons having no educational attainment

is about Rs 217 with minimal premium-income ratio

of 0.6 per cent as compared to Rs 2,451 (premium-

income ratio of about 3.6 per cent) in the case of

insured households. On the other hand, at the all India

level, graduate-and-above chief earner households

pay an average premium of Rs 4,558 and their policy

sum assured is about Rs 85,917. However, when only

insured households are taken into account, the

average premium paid rises to Rs 7,788 with a sum

assured of Rs 1,48,468. Their premium share in total

income is about 3.5 per cent at the all India level and

5.3 per cent for insured households.

C. Value of life insurance and age of chief earner

Households whose chief earners are aged 65 years and

above pay a premium of Rs 3,994 and their sum

assured is valued at Rs 1,34,145. Households whose

chief earners are in the age group 56-65 years and 46-

55 years have only marginal differences in the amount

they pay as premium (Rs 5,111 and Rs 4,973

respectively) and in the sum assured of their policies

(Rs 1,26,082 and Rs 1,17,342 respectively). Similarly,

for households with chief earners in the age groups

36-45 years and 26-35 years, there is a difference in

the premium paid (Rs 5,220 and Rs 4,949 respectively)

but the difference in the sum assured of their policies

are negligible (Rs 112,884 and Rs 110,329

respectively).

D.Value of life insurance and size of landholding

The two big landholding groups – medium and large

farmers – pay the highest premiums in absolute terms

(at Rs 3,384 and Rs 4,893 respectively) and the sum

assured of life insurance policies owned by them is also

the highest at Rs 101,969 and Rs 139,483 respectively.

Table 5.4:Value of insurance by age of chief earner

Less than 2526-3536-4546-5556-65More than 65

Share ofinsured

households (%)

14.221.824.629.825.124.7

All households


4951,0701,2871,5001,328955


1.041.922.081.941.591.11


13,25924,04727,75034,94531,70333,168

Insured households


3,7174,9495,2204,9735,1113,994


4.484.974.874.023.562.55


93,641110,329112,884117,342126,082134,145

Table 5.3:Value of insurance by level of education of chief earner

IlliteratePrimaryUp to higher secondaryGraduate +

Share ofinsured

households (%)

8.812.626.457.9

All households


217468

1,0244,558


0.581.041.553.48


6,72010,69627,46685,917

Insured households


2,4513,7383,8117,788


3.594.303.705.28


76,77684,644103,991148,468


As a percentage of average premiums paid in income

terms, however, their shares are lower than the

landless households.

E. Value of life insurance and level of income

Expectedly, household income is observed to be the

most important factor influencing insurance

payments. The proportion of insured households

steadily rises with income -- from 6 per cent for the

bottom quintile (Q1) to as high as 56 per cent for the

highest income group (Q5). The average premium paid

per household continuously increases from almost a

negligible amount for the lowest income group to as

much as Rs 4,433 for the top-most income quintile.

Even after an allowance is made for the differences in

the proportion of insured households at different

income levels (by considering the average premium

payment made by the insured households alone), a

very strong tendency for the average premium

payment to rise with income is noticed. The ratio of

premium payments to income also shows a clear

tendency to increase with income if all households are

considered. This substantiates to some extent, the

generally held belief that the marginal propensity to

save in insurance increases with income.

It is, however, interesting to note that if households

contributing to insurance alone are considered, much

variation is observed in the premium-income ratio at

different levels of income. In other words, households

contributing to insurance on an average make

payments of the same size relative to income (3-4 per

cent) across all income levels.

The sum assured of policy also increases with an

increase in the income levels. On an average, the top

most income quintile group (Q5) owns a policy of

Table 5.5:Value of insurance by size of the land holding

LandlessMarginal farmerSmall farmerMedium farmerLarge farmer

Share ofinsured

households (%)

13.615.524.828.343.1

All households


491473941

1,0092,208


1.251.041.611.271.75


13,26314,07122,37228,84460,088

Insured households


3,5893,1063,6543,3844,893


4.673.804.202.862.95


97,44390,99990,077101,969139,483


Rs 147,479 in contrast to Rs 75,526 for the bottom

most income quintile group (Q1).

5.4 SOCIO-ECONOMIC PROFILE OF INSURED VS

UNINSURED HOUSEHOLDS

5.4.1 DEMOGRAPHIC PROFILE

A. Insurance and occupation

Occupation levels vary significantly across (life) insured

households and uninsured households. Those earning

salaries account for 40 per cent of insured households

whereas just about 12 per cent of uninsured


Similarly, while the non-agricultural self-employed

account for just 14 per cent of uninsured households,

they account for 26 per cent of insured ones.

Labourers constitute the largest segment of the

uninsured, heading over 39 per cent of the uninsured

household.

The self-employed in agriculture comprises the next

largest group among uninsured households,

accounting for 33 per cent of the households. In the

case of insured, by contrast, this group accounts for

just 7 per cent of the households.

B. Insurance and education

Life insurance ownership is a function of education.

While nearly 31 per cent of life insurance owners have

done their graduation or higher studies, just 6 per cent

of non-owners are graduates. About half of life

insurance owners in India have studied up to higher

secondary, this figure reduces to 38 per cent in the

case of non-owners of life insurance. A higher

proportion of non-owners are primary educated (25

per cent) and illiterates (29 per cent), compared to just

11 per cent and 8 per cent respectively, in the case of

life insurance owners.

C. Insurance and age

At the all-India level, most life-insurance owners are

in the age group of 30-45 years (48 per cent) while 26

per cent owners are in the age group of 45-60 years.

In contrast, 22 per cent non-owners are 30-45 years

of age and just 11 per cent are of 45-60 years age.

More non-life insurance owners are likely to be in the

less than 15 years age group (34 per cent) than other

age-groups. Only 4 per cent of life insurance owners

are less than 15 years. Similarly, only 4 per cent of life

insurance owners are in the 60+ age group

Figure 5.5:Major source of household income ofinsured versus uninsured

Insuredhousehold

Uninsuredhousehold

Regular salary/wages Self employment in non-agriculture Labour

Self employment in agriculture Others

39.9 25.8 23.7 6.9

11.5 14.2 38.8 32.6 2.9

3.7

0 100% of households

80604020

64


D. Insurance and marital status

A majority of life insurance owners in India are married

(87 per cent). Just 11 per cent owners are unmarried

and a minimal 2.6 per cent fall under other categories

(such as divorced, widowed, etc). On the contrary, at

an all-India level, nearly 49 per cent non-owners are

unmarried, followed by 48 per cent married people.

E. Insurance and gender

Of the insured population, an overwhelming majority –

86 per cent – comprises of males. Only 14 per cent of

the insured are females. When we do a similar analysis

of the uninsured population, we notice that nearly 52

per cent of the uninsured are males and 48 per cent

are females.

5.4.2 ECONOMIC PROFILE

The income and expenditure levels of insured

households are more than double of uninsured. While

the average insured household in India had an annual

income of Rs 113,190 in 2004-05, and an expenditure of

Rs 78,475, the average household income of households

that are uninsured was found to much lower – at

Rs 49,482 per annum – with an average annual

expenditure of Rs 39,435. An insured, therefore, (on an

average) is left with nearly thrice the amount to save

and invest (at Rs 34,714 per annum) as compared to an

average uninsured household (Rs 10,137).

There is a big difference in the way this money is being

spent and saved. The average Indian household spent

about three-fourth of their income on routine and

non-routine expenditure in 2004-05. The difference

between the insured and uninsured households is

evident in the spending patterns of households. While

insured households spend (on an average) Rs 28,871

on food items in a year, uninsured households’ spend

level on food items is Rs 18,364. Similarly, uninsured

households’ expenditure on non-food items is lower

at Rs 15,226 per year compared to insured households’

expenditure of Rs 34,959 per year.

While non-routine expenditure accounts for around

12.9 per cent of incomes in insured households, the

figure is marginally lower – at 11.6 per cent – in the

case of uninsured households. At the all India level, it

is s 12.2 per cent.

Insured households spend around 45 per cent of their

incomes on food while the figure is around 55 per


cent in the case of uninsured households. There is a

large difference in the proportions spent on transport

(12.5 per cent among insured versus 9.2 per cent for

uninsured) and on education (8.7 per cent versus 6.6

per cent) but expenses in other areas like housing

(5.1 per cent versus 4.5 per cent), health (4.6 per cent

versus 4.7 per cent), clothing (7.1 versus 6.9 per cent)

and buying durables (5 versus 4.9 per cent) are not

too dissimilar.

There is a huge difference in the case of unusual

expenditure incurred by the insured and uninsured

households. Weddings, births and other ceremonies

account for the bulk of non-routine expenditure in

uninsured households. It is also observed that

medical expenses account for a third of non-routine

expenditure among uninsured households. More

specifically, expenditure on social ceremonies

accounts for 54 per cent of an uninsured household’s

total non-routine expenditure. For medical

emergencies the corresponding figure is about 33

per cent. This falls to 49 per cent and 21 per cent

respectively in the case of insured households. On

the other hand, insured households spend three

times more on education-related expenses as

compared to the uninsured households (4.4 per

cent). Similar patterns are observed in the case of

travel expenses.

34,714

Figure 5.14:Saving habits - insured versusuninsured households

0 40,00020,000

Surplusincome

Financialinvestment

Physicalinvestment

10,137

6,733476

9,3041,906

Savingsin cash

18,6777,754

Insured households Uninsured households

30,00010,000Rs/annum


Household saving rates in India have always been high.

Survey results reveal that around 81.4 per cent of

households at the all-India level save some part of their

earnings – the figure is 96.4 per cent for insured

households and 76.5 per cent in the case of uninsured.

The survey shows that insured households had an

average income of Rs 113,190 in 2004-05 and

uninsured ones had Rs 49,482. Of this, routine and

non-routine expenses added up to 69 per cent of the

total income for insured households and 80 per cent

for uninsured households. Therefore, surplus income

is around 31 per cent in the case of insured household

and 20 per cent for uninsured ones.

Of the surplus income, around 19 per cent were

invested in financial instruments (except bank

deposits) in the case of insured households. And this

falls to 5 per cent in the case of uninsured households.

Among all financial savings, insurance figures as

number one, beating categories such as

shares/debentures and even post office deposits.

Insured households not only invest in insurance, but

their investments in other modes, such as shares,

debentures, jewellery and small savings also tend to

be higher than that of the uninsured households.

5.4.3 OWNERSHIP OF SELECT CONSUMER DURABLES

Ownership of consumer durables among households

that possess life insurance is high. At an all-India level,

90 per cent of life insurance owning households own

television sets, 66 per cent own two-wheelers, 42 per

cent have refrigerators, 38 per cent own cellular

phones, 18 per cent own washing machines, 15 per

cent have cars/jeeps, 18 per cent own pump-sets,

5 per cent own credit cards, 3 per cent own air-

conditioners and 4 per cent own tractors. In contrast,

only 54 per cent non-life insurance owners own TV

sets, 26 per cent own two-wheelers, 11 per cent own

refrigerators, 9 per cent own cellular phones, 4 per

cent own washing machines, 3 per cent own

cars/jeeps and 10 per cent own pump-sets. The

ownership of credit cards, air-conditioners and tractor

is insignificant.

5.5 SAVING RELATED BEHAVIOUR OF INSURED

HOUSEHOLDS

5.5.1 WHY DO INSURED HOUSEHOLDS SAVE?

Nearly 88 per cent of insured households save for

emergencies compared to an overwhelming 81 per

1,013

Figure 5.15:Investment profile - insured versus uninsured

0 2,5001,000

Stockmarket

SmallSavings

Jewellery

191

713222

2,116420


2,0001,500500Rs/annum


cent of uninsured households. Seventy four per cent

of insured households save for the old age compared

to 67 per cent of uninsured households. When it

comes to saving for gifts, donations and pilgrimage,

the percentage of insured households is higher than

those of uninsured households – 20 per cent versus 18

per cent. Saving for social ceremonies is important for

66 per cent of insured households, compared to 62 per

cent uninsured households. Nearly 29 per cent of

insured households save to buy consumer durables

compared to 20 per cent of uninsured households.

While 50 per cent insured households are saving to

buy/build a house, the same proportion is 46 per cent

for uninsured households. Nearly 52 per cent insured

households save to enlarge their business versus 45

per cent non-owners. Saving for the education of

children is a priority among 88 per cent of insured

households as compared to 79 per cent uninsured.

5.5.2 WHERE DO INSURED HOUSEHOLDS

PREFER TO SAVE?

Nearly 65 per cent of insured households prefer to

save in bank deposits while it is just 45 per cent in the

case of uninsured households. The behaviour with

respect to keeping cash at home follows in the

reverse pattern. Households that are uninsured have

a higher tendency to keep their cash at home (42 per

cent) while those that are insured have a lower

tendency to do the same (19.3 per cent).

Nearly 4 per cent of insured households opt for post

office deposits and another 3 per cent have accounts

in cooperative societies. The percentage among

uninsured is 6 per cent and 3 per cent respectively for

post office and cooperative society deposits. Only 7

per cent of insured households opt for purchasing

insurance policies. Some of the uninsured households

also indicated the preference to save in life insurance

but this figure is miniscule. Purchasing bonds, chit

funds and lending money are not common form of

savings for both insured and uninsured households.

93.7

Figure 5.19:Accounts in financial institution and loanoutstanding

Owned an account infinancial institution

Loan outstanding

56.824.423.8


0 10020 40 60 80% of households

17.9

Figure 5.17:Motivation to save - insured versusuninsured households

Gifts, donationsand pilgrimages

Buy largeconsumer goods

Buy or buidhouse

Improve orenlarge business

Socialceremonies

20.020.2

29.145.750.0

44.952.4

61.865.667.3

Old age

Educationof children

73.878.6

88.1

Emergencies 81.188.2


0 1005010 20 30 40 60 70 80 90% of households

Rea

son

sfo

rsa

vin

gs

0 1005010 20 30 40 60 70 80 90% of households

Figure 5.18:Preferred form of saving - insured versusuninsured households

Insuredhousehold

Uninsuredhousehold

Keep at home Deposit in bankDeposit in post office Deposit in Co-operative

society Purchase insurance policies Others

19.3 2.1

42.5 45.2 3.3

64.9


5.5.3 OWNERSHIP OF ACCOUNTS IN FINANCIAL

INSTITUTIONS AND OUTSTANDING LOANS

Owning an account in a financial institution is also a

function of life insurance ownership. Predictably, fewer

uninsured households hold accounts in any financial

institution as opposed to the insured. At the aggregate

level, 94 per cent of insured households own accounts

in a financial institution, with percentages pegged at

57 per cent for uninsured households.

5.5.4 MANAGING ECONOMIC HARDSHIP

In the case of various economic hardships including

the death of the chief earner and major illnesses in the

family, the normal way to cope with such calamities

has been to draw down on personal savings. The

insured-uninsured split: 67 per cent insurance-owning

households and 51 per cent non-owning households

took recourse to personal savings in the case of death

of chief earner of the household. Almost a fifth of

insured households opted for a loan from friends or

relatives to tide over the financial crunch. The

measures taken by the household in the case of other

economic shocks follow a similar trend.

5.6 INSURED HOUSEHOLDS’ PERCEPTION OF

FINANCIAL SECURITY

5.6.1 CONFIDENCE IN STABILITY OF

SOURCE OF INCOME

The main reason why insured households tend to save

for emergencies and not for their old age is the fact

that, by and large, they feel quite secure about their

ability to live off their savings after retirement, and to

be able to find another job within months of losing the

current one.

67.3

Figure 5.20:Measures taken to overcome death ofchief earner


Using ownsaving

Laon fromfriends/relatives

Selling/mortagedof land, house,

jewellery, etc

None

Loans fromemployer

50.5

20.224.9

2.98.6

1.34.5

1.11.9

Others 7.29.7

0 20 40 60 80% of households

77.0

Figure 5.21:Measures taken to overcome major sicknessof any household member


Using ownsaving

Laon fromfriends/relatives

Selling/mortagedof land, house,

jewellery, etc

None

Loan fromemployer

50.4

11.727.0

1.12.0

2.66.8

0.30.4

Others 7.313.4

0 20 40 60 80% of households


At the all-India level, 23.2 per cent of insured

households said they were very confident about the

stability of their household income, and another 51 per

cent said they were confident. Another 16 per cent

were less confident and not confident at all, and

another 9.5 per cent did not indicate anything. A large

reason for this, though, may also be a factor that most

Indian households feel that their family and children

will be there to look after any exigencies.

Surprisingly, even among uninsured households, high

percentages were relatively upbeat about their

financial security - 38 per cent were "confident" and

9.5 per cent "most confident" about their future

financial status. However, the uninsured group had

more households than the insured ones who said they

were less "confident", "least confident" or "totally

uncertain" about their financial stability - 22 per cent,

14 per cent and 17 per cent respectively.

5.6.2 TIME TO RECOVER

An indicator of the kind of financial planning most

households undertake is the time they believe it will take

to recover from a loss of income compared to their level

of confidence about the stability of their incomes. Thirty

five per cent of insured households believe it will take

them less than six months to be able to replace their

current incomes in case of a disruption. More uninsured

households are unsure of the time frame by which they


compared to insured households (30 per cent). A higher

share of households who own life insurance claim they


within a year, compared to those who do not own

insurance (19 per cent).

5.6.3 SUSTAINABILITY ON CURRENT SAVINGS

The possibility that households will draw down on

current savings to meet routine expenditure in case of

a sudden drop in income levels is borne out of the fact

that about 4 per cent of households said that if they

lost their major source of household income, they

could sustain themselves beyond a year. This

proportion differs across insurance owning

households. Hardly 2 per cent of households that do

not own life insurance can sustain themselves for

more than a year on their savings as compared to 9

per cent for insured households.

Figure 5.23:Time to recover in case of loss of income source

Insuredhousehold

Uninsuredhousehold 33.6 0.819.3 8.1 38.2

35.3 25.9 7.6 0.930.4

Less than 6 month One yearTwo years Can�t say Others

0 10020 40 60 80% of households

0 10020 40 60 80% of households

Figure 5.24:Sustainability on current savings

Insuredhousehold

Uninsuredhousehold

Less than 6 month 6-12 monthsMore than 12 months Can�t say

39.7

43.1 13.1

15.935.0 9.4

41.6

2.2


POTENTIAL MARKET FOR LIFE INSURANCEThe study clearly indicates that there is a definite

scope to increase the volume of savings in life

insurance, given the current distribution of income

amongst households and their employment structure.

A substantial proportion of households in all income,

occupation and education groups are uninsured. A

significant fraction of the uninsured householdsmight

not be aware of the benefits of life insurance or might

not know insurance agents who presumably tend to

concentrate their efforts in spreading insurance

among the upper income groups.

For instance, 39 million rural households and 18

million urban households are aware of life insurance

but do not own any policy and are confident about

their households’ financial stability. This customer

segment represents a key potential target segment

for life insurance marketers. These households have

the potential to increase the market for life

insurance by Rs 258 billion – the market potential in

rural areas is Rs 139 billion, while the corresponding

figure for urban areas is Rs 119 billion.

Alternatively, there are 11 million rural households

and 10 million urban ones that could be a lucrative

target for life insurance marketers. These segments

are aware of life insurance and are confident about

their financial security, but do not own any policy.

They earn more than the median income of insured

households. In monetary terms, at the (average)

current premium, this household segment could yield

additional Rs 105 billion - Rs 36 billion each in rural as

well as urban areas - as an immediate market that

needs to be captured by life insurance companies.

Based on the above calculations themarket (including

both rural and urban) could generate an additional

premium between Rs 105 billion to Rs 258 billion.

Educating the masses about the benefits of life

insurance and amore intensive sales campaign are the

only definite means of stepping up household savings

in this form in the short as well as the long-term.

Although greater employment security and growth in

income would help promote savings in this form,

there is scope for increasing savings even at the

current levels of income by educating the masses

about the importance of life insurance. This should

not be difficult for the service providers, considering

the fact that of late, they have beenmaking efforts to

increase life insurance ownership in rural India – a

more difficult task than extending the coverage in

urban areas. However, making households more

insurance-minded will be, comparatively, a more

difficult task that may require determined sales

efforts spread over a longer period of time.


CHAPTER 6THE WAY FORWARD

The Indian economy is growing at impressive rate.

But is this growth inclusive? While the government

has a role to play for the poorest households, it is

ultimately the prerogative of the households to take

care of their financial risks. The Max New York Life-

NCAER India Financial Protection Survey was

undertaken to evaluate the level of financial security

and vulnerability of Indian households compared to

their financial risks, based on their earnings,

expenditures and savings.

The Survey shows that the average household in

India had an annual income of Rs 65,041 in 2004-

05, and an expenditure of Rs 50,589, leaving it

with Rs 14,452 as surplus income to save and

invest. Of the surplus income, around 10-15 per

cent was invested in financial instruments

(except bank deposits ).

Indians have a high propensity to save but they

choose to put their money in low-yielding

instruments. About 81 per cent of Indian households

save. However, the savings are not invested in long-term

instruments. More than half of Indian households prefer

to save by keeping their surplus income in commercial

banks. What’s worse, more than a third of Indians simply

prefer to keep their surplus money at home.

Indians don’t financially plan their future. Despite

the lack of a social security system, saving for the old

age is not the top priority for Indian households. Most

households in India save for an emergency or for their

children’s education. Expenditure on social events, like

marriages, births etc, is generally planned.

Nonetheless, this remains a major reason why Indian

households – both urban and rural – borrow. Although

financial institutions (banks or cooperative societies)

constitute the main source of borrowing, a significant

proportion of Indian households rely on informal

sources, such as the money-lender, who charge heavy

rates of interest.

Awareness about insurance is high, but penetration is

abysmally low. Only 24% of Indian households own a

life insurance policy. And in most cases, the risk cover

is rather inadequate.

The Max New York Life-NCAER India Financial Protection Survey has clearly

brought to fore the fact that even though a majority of Indian households are

good savers, they don’t undertake financial planning and are financially at

risk. Yet, most households are optimistic about their future. The government,

private sector, NGOs and other stakeholders must work towards making India

a financially secure nation. The need of the hour is to step up financial literacy

levels, offer comprehensive solutions to meet customer needs and help agent

advisors graduate to becoming financial planners. The industry needs to

evolve innovative distribution channels and products that would suit the

largely underinsured rural markets of the country. The industry also needs to

develop products that suit the specific needs of women.


Indians are inherently optimistic about their future

financial security. An astounding 96 per cent of Indians

across rural and urban India felt they would not survive

for more than a year in case of a loss of their major

source of income. However, when asked how

confident they were about their financial stability, an

overwhelming 54 per cent answered in the

affirmative. This ‘misplaced financial optimism’ stems

from the notion that the joint family system would

protect them in times of crises. However, in a fast-

changing social system, this may not hold true.

‘Misplaced financial optimism’ is direct fallout of

the lack of financial literacy amongst Indian

households – both urban and rural – and the converse

also holds true. Hospitalisation of one earning member

of the household unshackles the myth and often

pushes a middle-class household below the poverty

line. An independent study has revealed that 24 per

cent of people hospitalised in India in a year fall below

the below poverty line due to hospitalisation.

The findings of the Max New York Life-NCAER India

Financial Protection Survey clearly point to the fact

that Indians, by far, are a financially vulnerable lot.

Therefore, there is an urgent need to chalk out ‘the

way forward’, towards building a more financially

secure nation. Here are some steps insurance

companies, government, banks, mutual funds and

NGOs need to take in order to make Indian households

financially more secure:

Make Indians financially literate: There is an urgent

need to work towards making households financially

more literate. Households need to understand the

financial risks of both ‘living too long’, as well as ‘dying

early’. Living too long is not even considered a financial

risk by most Indians.

Most Indians suffer from a misplaced optimism and

tend to believe that ‘nothing will happen to them’ and

that ‘savings will take care of things’ in case something

was to happen. With the spread of financial literacy,

this misplaced financial optimism will be eradicated.

In urban India and amongst the salaried, insurance is

largely used as a tax-saving tool, rather than for

protection. There is need to reorient the consumer

about the benefits of life insurance for both financial

protection, as well as for long-term wealth creation.

Greater emphasis on need-based selling of products:

The insurance industry needs to introduce high ethical

standards in the business of selling life insurance

products. Selling of financial instruments, like life

insurance, should be need-based. The agent advisors

must educate the client on the benefits of different life

insurance plans so that the customer is in a position to

take an informed decision. The first intention of the

agent advisor should be to provide adequate protection

to the chief earner of the household. And after that,

comes the intention of creating long-term wealth to

meet the financial needs at different stages of life.

Life insurance is a long-term contract. Therefore,

ethical selling of products is vital for the growth of this

industry. A mistake made in the form of purchasing

awrong policy is often difficult to rectify. The agent

may or may not be there, but the life insurer surely

will. Hence, it becomes more important for the life

insurer to build trust with its customers through need-

based selling and high standards of customer service.

Encourage financial planning: Today, India faces an acute

shortage of financial planners. A financial planner is a

person who understands the risk profile of an individual

and then draws up a financial plan for himor her. A

financial India Financial Protection Survey 79 planner is

also aware of various financial instruments available in

the market. In India, financial planning is virtually non-

existent. As a result, individuals don’t invest wisely and

invariably end up buying wrong life insurance policies

and other financial instruments. Hence, they are unable

to suitablymeet their financial needs.


Internationally, most financial planners charge a fee for

their service and give unbiased, need-based advice to

their clients. Financial planning is a professional career

option with significant returns. In India, courses like an

MBA and chartered accountancy do not prepare

students for financial planning. Of late, some courses

in financial planning are gaining popularity. Yet, the

concept is fairly new to India.

Banks, insurance companies and mutual funds need

to engage financial planners to spread awareness

about their products. Internationally, most individuals

stick to one financial planner for their entire lifespan.

An individual’s risk profile keeps changing, so does the

basket of financial instruments available in themarket.

Financial planners keep track of both these changes

in order to offer the best bouquet of financial

solutions.

Set up a different distribution network for rural areas:

The traditional agency distributionmodelmay not be

financially viable to increase penetration of insurance

in backward areas and villages, which are sparsely

populated. In such areas, NGOs, banks, insurance

companies and private healthcare companies must

work together to distribute different financial

instruments required by the consumer. India also

needs insurance products that are especially designed

for the rural markets. While the government has

undertaken initiatives to launch new life insurance

schemes and spread awareness about life insurance in

these areas, a more concerted effort in the form of a

‘public-private partnership’ is required.

There is a pressing need to educate villagers about the

financial implications of a physical disability, disease or

death of their chief earner. NGOs can play a very vital

role in partnering with banks, healthcare companies

and insurance companies in spreading awareness

andmaking households in rural India a financially

secure lot.

Educate women about the benefits of life insurance: In

India, only 14% of all life insurance owners are women.

As more and more women become equal earning

partners, the need to insure themis increasing. In

villages, women have always been earners – working in

farms, rearing cattle or undertaking some craft to add

to the family income. Yet,most of these women are

uninsured. The insurance industry needs to better

understand the risk profile ofwomen in different parts

of the country and design life insurance products

based on their needs. The findings of this study are

unique as no comparable data exists for the country

prior to this study. Therefore, this study is an eye-

opener, not just for marketers of insurance products

but for policy and decision-makers in the government.

It is hoped that the resultant data sets will be useful to

different sets of users such as core researchers, policy

makers and service providers. This study has

demonstrated that it is not impossible to collect

reasonable data on income, expenditure and savings.

Thus, the resulted approach, survey methodology and

related experiences will add new dynamism in this area

and will be helpful in such studies in the future In

conclusion, the need of the hour is to spread financial

literacy. Indian households need to understand their

financial risk profile as well as their short-term and

longtermfinancial needs to undertake financial

planning which prepares themfor their needs at every

stage of life.While the market potential before life

insurance companies in India is huge, the players must

expand the market by providing relevant solutions to

different customer segments. In rural areas, there is

need to enhance the reach of life insurance products.

And in urban India, insurance companies must work

towards improving adequacy of life insurance

coverage by focusing on short and long-termneeds.

Amore holistic approach to financial planning in

general and life insurance in particular, holds the key to

building amore financially secure India.


CONCEPTS, DEFINITIONS AND SURVEY METHODOLOGYANNEXURE I

1. Concepts and Definitions

A household is the basic unit of analysis in this Report.

Most of the quantitative classificatory factors such as

income, expenditure, investment, surplus income,

amount of life insurance payments, etc, refer to the

household as a whole. Certain other characteristics

used for the analysis such as occupation, age,

education and source of income refer, however,

pertain only to the chief earner of the household. The

main concepts and measures used in this study have

been defined below.

Household: A group of persons normally living

together and taking food from a common kitchen

constitutes a house¬hold. The members of a

household may or may not be related by blood or

marriage. Servants, permanent labourers and

unrelated members are treated as mem¬bers of the

household in case they take their meals regularly

from the same kitchen. If a person was out for more

than six months during the reference period (2004-

05), he/she was not treated as a member of the

household. Those entering the household on account

of marriage or other alliances and new-born babies

are counted as members of the household, even if

they lived with the household for less than six

months.

Household size: The number of resident members of

a household is its size. It includes temporary stay-away

members, but excludes temporary visitors and guests.

Head of the household: The head is the main

decision-maker in the family and the person best

informed about the family’s finances. Usually, he/she is

the chief earner or the oldest me mber in the

household. The household members were expected to

inform the interviewer who they regard as their

‘head/chief earner’.

Rural and urban areas: The rural and urban areas of the

country are taken from Census 2001, for which the

required information is available with the Survey

Design and Research Division of the National Sample

Survey Organisation (NSSO). The lists of Census villages

as published in the Primary Census Abstracts (PCA)

constitute the rural areas. The lists of cities, towns,

cantonments, non-municipal urban areas and notified

areas constitute urban areas. The definition of urban

areas adopted for this study is the same as that used

in the 2001 Census. Accordingly, urban areas include:

� All places with a municipality/corporation,

cantonment board or a notified town area

committee;

� All other places satisfying the following criteria:

� Minimum population of 5,000

� At least 75% of the male workforce is engaged

in non-agricultural pursuits

� A population density of over 400 per sq km

(1,000 per sq mile).

Household income: In broad terms, income refers to

regular receipts, such as wages and salaries, income

from self-employment; interest and dividends from

invested funds, pensions or other benefits from social

insurance and other current transfers receivable.

Income represents a partial view of economic well

being and comprises the regular or recurring receipts

of household economic accounts. It provides a

measure of resources available to the household for

consumption and savings.

� Regular salaries and wages: The regular salaries

and wages are the earnings that a person working in

other’s farm or non-farm enterprises (both

household and non-household) gets in return on a

regular basis (and not on the basis of daily or periodic

renewal of work contract).

� Self-employed in non-agriculture: Persons/

households who are engaged in their own non-farm


enterprises are defined as self-employed in non-

agriculture (craft/business /professionals, etc).

� Agricultural labour: An individual following one or

more of the following agricultural operations in the

capacity of labourer or hire or in exchange, whether

paid wholly in cash or kind or partly in cash and

partly in kind.

� Casual wage labour: A person casually engaged in

non-farm enterprises (both household and non-

household) and getting in return wages according to

the terms of daily or periodic work contract is

treated as casual wage labour.

� Self-employed in agriculture: Persons/households

who are engaged in their own farm are defined as

self-employed in agriculture.

� Income from other sources such as rent from land;

rent from providing accommodation and capital for

production; net interest received (income from

bonds, deposits and savings); dividend (income

received from stock holdings and mutual fund

shares); employer-based private pension (payments

received from companies/government after

retirement); government social insurance and social

assistance benefits, etc

Major source of household income (major occupation):

In the event that members of a household engage in

only one type of income source, the nature of the

income source in order to earn livelihood is the

primary occupation for the household. In the event

that the household is pursuing two or more economic

activities, the principal occupation is considered to be

the economic activity that contributes maximum to

household income.

Routine consumption expenditure: Household

consumption that includes the value of all goods and

services provided in kind by the employer or as a result

of home production (including the value of imputed

rent for owner-occupied dwellings), which were

already included in total income. Consumption

expenditure is classified into eight groups:

� Food: While recording consumption, care should

be taken to include consumption on ceremonies,

parties, etc. If the household makes any transfer

payment in terms of commodities (like cereals,

beverages, fruits, vegetables pulses, etc), the

quantity of such commodities should not be shown

under domestic consumption of the payer

household. For this survey, the portion out of that

receipt consumed by the recipient household during

the reference period was shown against the

consumption of the recipient household.

� Housing: For the reference period, information was

collected on expenditures such as

rent/taxes/maintenance/other household

services/water bills etc. The actual expenditure

incurred towards purchase of these items, used for

non-productive purposes, was considered as the

consumption expenditure of the household.

Expenditure in both cash and in kind was taken into

account. Consumption was recorded in terms of an

average per month.

� Health expenses (fee on medical facilities/medical

labs/medicines): These items include expenditure on

medicines and medical goods, payments made to

doctors, nurses etc on account of professional fees

and those made to hospital, nursing home, etc for

medical treatment.

� Transport (road/air/fuel/repair/insurance/license):

Expenditure incurred on account of journeys

undertaken and/or transportation of goods made by

airways, railways, bus, tram, steamer, motor car (or

taxi), motor-cycle, auto-rickshaw, bicycle, rickshaw

(hand-drawn and cycle) horse-cab, bullock cart,

hand-cart, porter or any other means of conveyance.

In case of owned conveyance, the cost of fuel

(petrol, mobile oil, diesel, etc) for power-driven

transport and animal feed for animal-drawn carriage

were also taken into account.

� Education: This was meant for recording expenses

incurred in connection with education like purchase

of books/stationeries/school fee/boarding/school

transportation. etc. It also included fees paid to


educational institutions (e.g. schools, colleges,

universities, etc) on account of tuition (inclusive of

minor items like game fees, library fees, fan fees,

etc) and payment to private tutors.

� Clothing and footwear: Information on the value of

consumption of all items of clothing and footwear

were collected in (whole number of) rupees.

� Consumer durable goods: Expenditure incurred on

purchase of consumer durables and cost of raw

materials and services for construction and repairs of

durable goods for domestic use were collected

against this item. Expenditure included both cash

and kind. Expenditure incurred on purchase of

durable goods for giving gifts was also included.

Unusual household expenditure: It includes occasional

but large annual expenditures on social ceremonies

(marriage, birth and other social events), health/

medical, higher education, leisure and holiday travel,

jewellery etc.

Surplus income: Surplus income refers to the current

income less current routine consumption expenditure

and unusual expenditure.

Investment: The annual investment made by all the

members of household in stock markets (shares/

debentures/bonds), small savings, insurance, others.

Appendix Table 1:Profile of the Rural Sample

Himachal PradeshPunjabChandigarhUttaranchalHaryanaDelhiRajasthanUttar PradeshBiharMeghalayaAssamWest BengalJharkhandOrissaChhattisgarhMadhya PradeshGujaratMaharashtraAndhra PradeshKarnatakaGoaKeralaTamil NaduPondicherryALL INDIA

Numberof NSS

Regions

121121442134131656441241

64

Totalvillages

17,49512,278

2315,7616,764

15839,75397,94239,018

-25,12437,95529,35447,52919,74452,11718,06641,09526,61427,481

3471,364

15,40092

571,474

Samplevillages

32485

30476

1182741961067

123598649

13290

1571601031063

10110

1,976

Totaldistricts

12171

13199

3270377

231718301545253322272

14304

522

Sampledistricts

681691

1629185

1199

147

221216121427

142

250

Listedhouseholds

2,7364,983

5003,0444,862

66812,03630,35621,721

9916,419

12,4385,9309,9584,924

14,09210,65918,05716,61911,9691,1666,368

10,4431,040

211,979

Samplehouseholds

51276878

48075288

1,8884,3843,136

1601,0721,968

9441,376

7842,1121,4402,5122,5601,648

160848

1,616160

31,446

STAGE IIISTAGE IISTAGE I


Reference period: The information was collectedprimarily for the year April 2004-March 2005. For thequestions where the reference period was mentioned as“last month” was defined as 30 days preceding the date ofenquiry.

Period of survey: Primary data was collected duringOctober 1, 2005 to February 28, 2006.

2. CoveragePrimary survey of households was undertaken in 24 majorstates/Union Territories of India covering both rural andurban areas of Andhra Pradesh, Assam, Bihar, Chandigarh,Chhattisgarh, Delhi, Goa, Gujarat, Haryana, HimachalPradesh, Jharkand, Karnataka, Kerala, Madhya Pradesh,Maharashtra, Meghalaya, Orissa, Pondicherry, Punjab,Rajasthan, Tamil Nadu, Uttaranchal, Uttar Pradesh, andWest Bengal. Territories excluding Jammu & Kashmir,Sikkim, Arunachal Pradesh, Nagaland, Manipur, Mizoram,Tripura, Andaman & Nicobar Islands, Daman & Diu, Dadra &Nagar Haveli and Lakshadweep. Remaining states wereleft out due to operational difficulty. These states accountfor only 3 to 4 per cent of the country's total population.

3. Sample designA three-stage stratified sample design has been adoptedfor the survey to generate representative samples.Sample districts, villages and households formed the first,second and third stage sample units respectively forselection of the rural sample, while cities/towns, urbanwards and households were the three stages of selectionfor the urban sample. Sampling was done independentlywithin each state/UT and estimates were generated at thestate/UT level. Estimate for all-India was arrived atthrough an aggregation of estimates for all states/UTs.The sample sizes at first, second and third stages in ruraland urban areas were determined on the basis of availableresources and the derived level of precision for keyestimates from the survey, taking into account theexperience of NCAER in conducting the earlier surveys .Within a state there are variations with respect to socialand economic characteristics, the bigger a state, thelarger the variation. In the National Sample Survey (NSS),within a state, regions are formed considering thehomogeneity of crop pattern, vegetation, climate,physical features, rainfall pattern, etc. An NSS region is agroup of districts within a state similar to each other inrespect of agro-climatic features. In the present surveywithin a state, NSS regions formed the strata for bothrural and urban sampling.

Selection of the rural sampleIn the rural sample design, a sample size of 250 districtswas allocated to the 64 NSS regions within the 24 coveredStates/Union Territories (UTs) in proportion to the totalnumber of districts in an NSS region. From each of theNSS regions, the allocated number of districts wasselected, as the first-stage sample units, with probabilityproportional to size and replacement, where ruralpopulation of each district as per Census 2001 was used assize measure.

Villages formed the second stage of selectionpro¬cedure. District-wise lists of villages are availablefrom census records (Census 2001) along withpopula¬tion. A total sample of 1,976 villages (second-stage sampling units) was allocated to the selected 250districts, approximately in proportion to rural populationof each selected district. The allocated number of samplevillages in a selected district was chosen with equalprobability sampling approach.

In each of the selected villages, approximately 100households were selected following equal probabilitysampling approach for listing purpose and preliminarysurvey. During this preliminary survey, information onland possessed and principal source of income of thelisted household was collected for use in stratifying thelisted households into eight strata as follows:� Stratum 1: Principal source of income was

self-employment in agriculture and land possessedwas 0-2 acres;

� Stratum 2: Principal source of income was

Appendix Table 2:Sampling fraction for city/town group

IIIIIIIVVVIVIIVIIIIX

Totaltowns

33

293798

219396

1,1352,2704,190

Sampletowns

33

29379856442844

342

Samplingfraction

1.001.001.001.001.000.260.110.020.020.08

> 100005000-100001000-5000500-1000200-500100-20050-10020-50< 20

TOTAL

TownClass

Town population('000)


self-employment in agriculture and landpossessed was 2-10 acres;

� Stratum 3: Principal source of income wasself-employment in agriculture and land possessedwas above 10 acres;

� Stratum 4: Principal source of income was labour(agricultural/other casual);

� Stratum 5: Principal source of income wasself-employment in non-agriculture and landpossessed was 0-2 acres;

� Stratum 6: Principal source of income wasself-employment in non-agriculture and landpossessed was above 2 acres;

� Stratum 7: Principal source of income was regularsalary/wages and other sources and landpossessed was 0-2 acres; and

� Stratum 8: Principal source of income was regular

salary/wages and other sources and landpossessed was above 2 acres.

From each of the above eight strata, two householdswere selected by following equal probability samplingapproach. In case, any of the strata was found to bemissing (no household), then households from previousstratum, where additional households were available,were selected so as to get 16 sample households in aselected village.

Following the above sampling design in rural areas, therealised sample of 31,446 households out of preliminarylisted sample of 2,11,979 households was spread over1,976 villages in 250 districts and 64 NSS regions coveringthe 24 States/UTs. .

Appendix Table 3:Profile of the Urban Sample

Himachal PradeshPunjabChandigarhUttaranchalHaryanaDelhiRajasthanUttar PradeshBiharMeghalayaAssamWest BengalJharkhandOrissaChhattisgarhMadhya PradeshGujaratMaharashtraAndhra PradeshKarnatakaGoaKeralaTamil NaduPondicherryALL INDIA

Numberof NSS

Regions

121121442134131656441241

64

Totalblocks

2247221

129596289851

2,036444

6100

-860322473799572

2,2201,172

90512

1,0192,272

2315,615

Sampleblocks

57410187460

114316756

20142684544

114146273195153

479

20713

2,255

Totaltowns

56157

176974

21667012010

11023995

13284

3681903471732373898684

4,190

Sampletowns

21213

131

19511415

181088

19193527222

13372

342

Listedhouseholds

5027,5961,0001,8817,5437,197

11,56831,9757,973

6001,940

14,6206,8964,5014,412

11,51614,61531,55320,42618,819

4408,030

21,9371,273

238,813

Samplehouseholds

701,036

140252

1,036840

1,5964,4241,050

84280

1,988952630616

1,5962,0443,8222,7302,142

561,1062,898

18231,570

STAGE IIISTAGE IISTAGE I


Selection of the Urban SampleAccording to Census 2001, there are about 4,850cities/towns in the states/UTs (excluding Jammu &Kashmir). The population of cities/towns in India variesfrom less than 5,000 to over a crore. In the urban sampledesign, within the 24 covered states/UTs, the 64 NSSregions were again treated as strata. In each NSS region,towns were categorised into five groups based on theirpopulation, namely big towns and small towns. There are170 cities with a population exceeding 200,000. All thecities were selected with a probability of one. Theremaining cities/towns were grouped into four strata onthe basis of their population size and from each stratuma sample of towns was selected independently.

A progressively increasing sampling fraction withincreasing town population class was used forde¬termining the number of towns to be selected fromeach stratum. From each NSS region, the allocatednumber of small towns was selected by following an equalprobability sampling procedure. The sampling fractionwas used at the state level (Table 2).

A total sample size of 2,255 urban wards was allocatedamong the selected small/big towns in proportion to thenumber of wards in the respective towns. The allocatednumber of wards was selected from each sample townfollowing equal probability sampling approach. Thus,towns and wards formed the first and second-stagesample units in the urban sample design.

Like in the rural sample design, within a selected ward, asample of about 100 households was selected for listingand preliminary survey, following equal probabilitysampling approach. In the preliminary survey, at the timeof listing of the sample households, information onhousehold size, household consumption expenditure forlast month ((MPCE), and principal source of householdincome were collected for use in stratifying the listedhouseholds into seven strata as follows:� Stratum 1: Principal source of income was regular

salary/wage earnings and sources like remittances,pension, etc and MPCE of Rs 800 or less;

� Stratum 2: Principal source of income same as instratum 1, but MPCE between Rs 801 and Rs 2500;

� Stratum 3: Principal source of income same asstratum 1, but MPCE above Rs 2500;

� Stratum 4: Principal source of income wasself-employment and MPCE less than Rs 800;

� Stratum 5: Principal source of income was

self-employment and MPCE between Rs. 801and Rs 2500;

� Stratum 6: Principal source of income wasself-employment and MPCE above Rs 2500;

� Stratum 7: Principal source of income wascasual labour (agricultural or non-agricultural).

From each of the above strata, two households wereselected at random with equal probability of selection. Ifthere was no household in any of the strata, the shortfallwas compensated from the previous stratum, whereadditional households were available, so as to get 14sample households from each selected ward in urbansector for detailed survey.

Following the above sampling design in urban areas, therealised sample of 31,570 households, out of preliminarylisted sample of 2,38,813 households, was spread over2,255 urban wards in 342 towns and 64 NSS regionscovering the 24 States/UTs.

Appendix Table 4:Number of Persons Surveyed by Location

Himachal PradeshPunjabChandigarhUttaranchalHaryanaDelhiRajasthanUttar PradeshBiharMeghalayaAssamWest BengalJharkhandOrissaChattisgarhMadhya PradeshGujaratMaharashtraAndhra PradeshKarnatakaGoaKeralaTamil NaduPondicherryTotal

Rural

2,7444,044

4342,5064,612

47510,74428,81915,607

8664,803

10,1854,9997,0463,998

11,6096,760

13,09111,3148,134

7723,6357,033

740164,970

Urban

3225,285

6611,2575,4533,9608,635

23,4625,272

3081,1078,8854,8233,0402,9488,0909,700

18,15811,2459,608

2814,539

12,163777

149,979

All India

3,0669,3291,0953,763

10,0654,435

19,37952,28120,8791,1745,910

19,0709,822

10,0866,946

19,69916,46031,24922,55917,7421,0538,174

19,1961,517

314,949

LIFE INSURANCEKaro Zyaada IraadaKa

Mnyl Ncaer Book How India Earns, Spends And Saves

Education

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