Covid-19 and Implications on India’s Savings

India has announced its new industrial policy in the year 1991, but Indians never deviate from their traditional character of saving their money in various ways. For example – children are trained to save through saving boxes as a habit. Most of the people who belongs to middle class invest their money in chit funds, postal savings and bank saving accounts, employee’s provident funds, equity market and bonds. Though the LIC credibility has gone down very badly by the policies of the Modi’s government, still Indians believes even today the LIC policies more than the government. The new industrial policy in 1991 was about to privatize the sick public sectors, liberalize the economy for fresh investments and finally to face the challenges of globalization. This was the idea behind the new policy.

However, it was well clear during that time global economic environment was also one of the reasons for India to announce the new Industrial Policy in 1991. During that time India had sever foreign exchange crisis due to the Iraq war. Indian expatriates in the Gulf region were forced to vacate their jobs. This caused fast dry in our forex reserve and struggled to face the import for the following month.

The present scenario reflect what happened before, and is still caused by the Covid-19 pandemic. Indians working abroad are made to leave their jobs including US, Europe, South East Asia and Gulf region. People in these places who cannot sustain their job anymore like to be back in India. Indian government also through various ways, is bringing the stranded Indians back home. We all know that the growth is completely down. Expatriates sending money to India is also now declining fast. However, now we have comfortable forex reserve of US$ 513.25 billion as on 10thJuly 2020. So we need not panic and also the present scenario cannot be compared with the 90s.

However, the mass exodus of Indians from the Gulf will be one of our great worries if the situation will not change in the next six months. Especially in the Southern states these money was invested and saved in various ways to help the growth of the local economy. The present unexpected crisis due to the pandemic will be gradually responsible for halting the flow of money from the Gulf. Thus can cause damage in regular savings and spending for the Indians. Let us analyze how the Covid-19 crisis is going to have an impact on India’s savings.  

Remittance from the Gulf region

The recent report of the Ministry of Overseas Indian Affairs states that India receives remittance from approximately more than 35 million members of the Indian diaspora living abroad. Moreover, India retained its position as the world’s top recipient of remittance. In 2018 India received $79 billion as remittance from the India’s expatriates (Economic Times).

The Indian community in the Gulf region alone annually contributes around 53.5 % of the total remittance to India ( In the year 2016 India received $62.70 billion, and in 2017 $68.968 billion from the Indians abroad. The high remittance from top three countries during the year 2017 are the UAE $13.823 billion, US $11.715 and Saudi Arabia $11.239 respectively. Apart from these countries remittance flow from Kuwait is also impressive. In the year 2017 India received $3.016 billion, and in 2018 $4.8 billion from the Indian expatriates in Kuwait.

Interestingly 19% of the total inward remittance to India goes to Kerala ( So it would be understood that if remittance stopped sending money then obviously the implications naturally would severe for the receiving states. The recently proposed legislation to curb Indians in Kuwait is a worrisome matter. The Kuwait Government’s decision to “limiting the number of Indians not to exceed more than 15% of the total expatriate population” is sure to have an impact on India especially the state of Kerala. Already India is facing an unemployment rate mounting to the highest in 45 years. Jobless growth is not at all good for a country like India having huge population. The Modi administration should take this clarion call now. India should use our special diplomatic relationship with the Kuwait to sort out this emerging matter which is going to affect a number of Indian expatriates living and working in Kuwait. It is the right time to articulate diplomacy to keep India’s interest in the issue of Kuwait’s new legislation curbing Indians in the job market.

India’s savings and economy

Indian households contribute to about 60 per cent of the country’s savings. Auditor Gurumurthy says, “Saving culture is unique and a habit for Indians” (Business Line). Further, he says, “India’s growth will come from domestic savings” (The New Indian Express). Though we have differences of opinion about this statement, but it is true that Indians save more. It is clear that Indians never work to celebrate the weekends. 

At the same time India’s savings plunges to 15 year low due to the slowing economy (Economic Times). It is true that the slowdown in the Indian economy is also one of the reasons for the fall in savings. But the covid-19 issue has also halted the consumers as not to spend more or save. This is because an uncertainty glooms all over the world since January 2020. Hence, everyone is determined to run their families more cautiously than the pre-covid-19 times.

However, experts also agree that “The Covid-19 uncertainty, causing rise in forced savings and slow spending” (The wire). Many of us now have turned blindly to increase our health insurance is a well-known fact. Well, this is the need of the hour. No one can deny it. At the same time the ordinary people have to spend cautiously. This is because the lockdown causes halt in job creation. Factories are closed. Moreover, cuts in salaries and specific focus for health care related consumption which is actually new to our society. All the above said factors impacted on India’s savings and consumption activities. RBI study reveals that the Covid-19 related hardships made people to borrow more. If this has been the scenario, then obviously it will affect the normal Indian’s life and there will be nothing to save for the ordinary people.


It is vital clear that the Covid-19 issue has a deep impact on India’s ordinary people’s savings. Until the people experience normal life again, there will be no way to save money. Health expert’s opinions are contradicting. Even the WHO could not give a clear picture about when the normal life will resume. At this juncture savings in India will decline further. People don’t have money to save. If the present situation prevails for another six months then people will be forced to take their savings to buy essential goods for their survival. This is quite natural. Covid-19 has made it a hard time for ordinary people to take extraordinary risks for their survival. It means the pandemic causes huge implications on ordinary Indian lives and their savings.

Sancy K. Jose
Sancy K. Jose
PhD Scholar in Economics, Cochin University of Science & Technology, India.