Saving behaviour in India: Understanding the differences across castes

The past three decades in India have witnessed a sharp reduction in the historically large gaps in the education levels, occupation choices and wages of the backward castes called scheduled castes and tribes (SC/STs) relative to the rest of the population (non-SC/STs). Viktoria Hnatkovska and Amartya Lahiri examine how these changes have impacted the saving behavior of the two groups. They find that while the saving rates of SC/STs exceeded that of non-SC/STs in 1983, this excess saving of SC/STs declined during 1983-2010 period. A decomposition of consumption into durables and non-durables reveals that this trend also extends to durable goods consumption of the two groups. Hnatkovska and Lahiri find that a decline in wage uncertainty facing SC/STs may have contributed to the saving convergence between them and non-SC/STs.