A Study of Income and Saving Pattern in Darlawn Town (A
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A STUDY OF INCOME AND SAVING PATTERN IN DARLAWN TOWN (A DISSERTATION SUBMITTED FOR THE AWARD OF MASTER OF PHILOSOPHY IN ECONOMICS) BY LALRAMMAWIA KHAWLHRING TO THE DEPARTMENT OF ECONOMICS SCHOOL OF ECONOMICS, MANAGEMENT AND INFORMATION SCIENCES, MIZORAM UNIVERSITY 2013 I DEPARTMENT OF ECONOMICS Lianzela MIZORAM UNIVERSITY (Professor) Tanhril, Aizawl- 796009 CERTIFICATE This is to certify that the dissertation entitled “ A Study of Income and Saving Pattern in Darlawn Town” by Mr. Lalrammawia Khawlhring has been written under my guidance. The present work is the outcome of the candidate’s own endeavour and investigation. To the best of my Knowledge, the work as a whole or part has not been submitted to any other university for any research degree. II MIZORAM UNIVERSITY TANHRIL:MIZORAM June 2013 DECLARATION I, Lalrammawia Khawlhring, hereby declare that the subject matter of this dissertation entitled “ A Study of Income and Saving Pattern in Darlawn Town’’ is the record of work done by me, that the contents of this dissertation did not form basis of the award of any previous M.Phil degree to me or to the best of my knowledge to anybody else, and that this dissertation has not been submitted by me for any research degree in any other University/Institution. This is being submitted to Mizoram University for the degree of Master of Philosophy in Economics. (PROF.A.K.AGARWAL) (PROF.LIANZELA) (LALRAMMAWIA KHAWLHRING) Head of Department Supervisor Candidate III ACKHNOWLEDGEMENTS I express my heartfelt gratitude to the Almighty for His countless blessings and guidance throughout the study I am extremely thankful to my supervisor, Prof. Lianzela and all the faculty members as well as the non-teaching staffs of the Department of economics for their support and cooperation. I express my sincere gratitude to Dr. James L.T.Thanga, Asst. Professor, Department of Economics, Mizoram University for his scholastic guidance and expert advice throughout the research work, without him this dissertation would not have been completed. I gratefully acknowledge the kindness and cooperation received from Sub-Centre Darlawn and all the respondents of interview, who rendered necessary information, assistance and cooperation during the field work I am extremely thankful to the Principal and Staffs, Gov’t lawngtlai college, my fellow M.Phil scholars for their support, cooperation and valuable advice. Lastly, I’m truly grateful to my parents and friends for their constant support and cooperation. IV CONTENTS PAGES Certificate I Declaration II Acknowledgements III Contents IV CHAPTER I: INTRODUCTION 1-18 1.1 Introduction 1-4 1.2 Theoretical Background 4-9 1.3 Concepts of Income and Saving 9-10 1.3.1 Income 9 1.3.2 Saving 10 1.4 Economic Profile of Mizoram 11-15 1.5 Area of Study 15-16 1.6 Objectives of the Study 16 1.7 Hypothesis 17 1.8 Data and Methodology 17-18 1.9 Conceptual Framework 18-19 1.10 Chapter Plan 20 CHAPTER II : REVIEW OF LITERATURE 21-31 CHAPTER III : INCOME AND SAVING IN INDIA : SECONDARY DATA ANALYSIS 32-48 3.1 Introduction 32 3.2 Trends in National Income in India 33-35 3.3 Sectoral Composition of GDP 35-37 3.4 Trends and Pattern of Saving in India 37-43 3.5 Determinants of Household Saving 43-44 3.5.1 Average Propensity to Save 44-45 3.5.2 Marginal Propensity to Save 45-47 3.5.3 Elasticity of Savings. 47-48 CHAPTER 4: INCOME AND SAVING PATTERN IN DARLAWN TOWN: AN EMPERICAL ANALYSIS. 49-79 4.1 Introduction 49 4.2 Income and Saving Pattern in Darlawn Town 49-51 4.3 Socio-economic Characteristics of the Sample 51-53 4.4 Demographic Characteristics 53-54 4.4.1 Level of Education 54-56 4.4.2 Occupation and Level of Education 56-58 4.4.3 Sex and Education of Head of the Households 58-60 4.5 Income of the Households 60-67 4.5.1 Primary Source of Income 60-61 4.5.2 Secondary Source of Income 62-63 4.5. Determinants of Income 63-67 4.5.3.1 Number of Earners/Workers 63-64 4.5.3.2 Level of Education and Income 64-65 4.5.3.3 Occupation and Income 65-67 4.6 Saving of the Household 67-79 4.6.1 Demographic Factors and Saving 67 4.6.1 (a) Number of dependents and Saving 67-69 4.6.1 (b) Education of Head of the Households and Saving 69-71 4.6.1 (c) Occupation of Head of the Households and Saving 71-73 4.6.1 (d) Size of the Households and Saving 73-74 4.7 Household Income and Saving 75-76 4.8 Saving Source of the Sampled Households 76-78 4.9 Saving purpose of the Sampled Households 78-79 1.10 Testing of Hypothesis 79-80 CHAPTER V : MAIN FINDINGS AND CONCLUSIONS 81-87 BIBLIOGRAPHY APPENDIX Questionaire LISTS OF TABLES Table TITLE Page No 3.1 GDPFC and NDPFC at Current Prices 33 3.2 Composition of GDPFC at Current Prices 36 3.3 Pattern of Savings in Different Sectors in India 38 3.4 Sectoral Composition of Household Saving in India 42 3.5 Aggregate Household Sector Savings Function-APS (OLS Estimates) 44 3.6 Aggregate Household Sector Savings Function-MPS (OLS 46 Estimates) 3.7 Aggregate Household Sector Savings Function- 48 Elasticity of Savings (OLS Estimates) 4.1 Respondents of Interview 50 4.2 Occupation of the Sampled Households 51 4.3 Educational Status of head of the Sampled Households 55 4.4 Distribution of Households According to Occupation 57 and Level of education of Head of the Households 4.5 Distribution of Households According to Sex and 59 Education of Heads of Households 4.6 Primary Source of Income 60 4.7 Secondary Source of Income 62 List of Tables (Cont) Table Title Page No 4.8 Relationship Between Numbers of Workers and 63 Average Monthly Income 4.9 Level of Education and Average Monthly Income of 65 the Sampled Households 4.10 Occupation of head of the Household and Average 66 Monthly Income 4.11 Number of Dependents, Income and Savings in 68 Darlawn Town 4.12 Educational Status of Respondents, Average monthly 70 Income and Saving 4.13 Occupation of Head of the Households, Average 72 Monthly Income and Savings in Darlawn Town 4.14 Household Size, Average Monthly Income and 73 Savings in Darlawn Town 4.15 Average Monthly Income and Saving of Different 75 Income Groups in Darlawn town 4.16 Saving Source of the Sampled Households 77 4.17 Saving Purposes of the Households in Darlawn 78 Town LISTS OF GRAPHS Graph TITLE Page No 3.1 Household Sector Savings as Percent of PDI 41 3.2 Household Sector Savings in India 43 4.1 Respondents of Interview 50 4.2 Occupation of the Sampled Households 53 4.3 Head of the Households According to Sex and 60 Education 4.4 Saving Sources of the Sampled Households 77 ACRONYMS AMI : Average Monthly Income AMS : Average Monthly Savings APS : Average Propensity to Save CSO : Central Statistical Organisation GDP : Gross Domestic Product GDPFC : Gross Domestic Product at factor Costs GDS : Gross Domestic Savings GSDP : Gross State Domestic Product HHSS : Household Sector Savings HSLC : High School Leaving Certificate HSSLC : Higher Secondary School Leaving Certificate MPC : Marginal Propensity to Consume MPS : Marginal Propensity to Save NCAER : National Council of Applied Economic Research NH : National Highway NDPFC : Net Domestic Product ACRONYMS (Cont) OLS : Ordinary Least Squares PDI : Personal Disposable Income PIH : Permanent Income Hypothesis RBI : Reserved Bank of India CHAPTER I: INTRODUCTION 1.1: INTRODUCTION The economic growth and development of a country depends on the level of income, saving, which further increase to level of capital formation of a country. For the development of a country, it is necessary that income should be distributed equally; the level of savings must be increased and so of the level capital formation. India is a developing country and the level of income and savings are still very low compared to other developed countries. Moreover, the level of income distribution is uneven. The rich are becoming richer and the poor are becoming poorer. With high capital output ratio, India needs very high rates of saving and investments to make a leap forward in her efforts of attaining high levels of growth. Since the beginning of planning, the emphasis was on saving and capital formation as the primary instruments of economic growth and increase in national income. In order to have production as per target, capital formation was considered the crucial determinant and capital formation had to be supported by appropriate volume of saving. Growth will set in Page | 1 motion a self reinforcing process by which investment is encouraged, investment enhances growth and increased income raises saving. The study of income and saving is very important for the economic growth and development as it not only shows the income disparities of the people, what factors are necessary to be taken to reduce income inequality of the households. The level of saving is also depends on the level of income distribution, as the level of saving determine the level of capital formation. Examining household saving help us to understand how people deal with fluctuation in income in order to smooth their consumption. It is essential to look at the determinants of household saving and income/consumption to devise policies to advance economic growth and improve the livelihood of households (Ersado, Alwang and Alderman, 2000). The most promising way to boost national savings is through increasing public savings because the government has been a major dis-saver for quite some time.