In savings we trust

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The festive season is here. There are allurements for shoppers everywhere – phones to cars, consumer durables to apparel, personal care products to diners coming up with new menu. Moreover, the financial service industry is making splurging easier and more convenient than earlier. Credit card marketers are getting more and more aggressive, and the buy-now-pay-later brigade is maturing very fast that they are attracting people with the bait of financing everything from holiday trips to consumer durables. Flush with liquidity, banks and non-banking financial companies are constantly trying to push personal loans down your throat.

Stuck up within their homes, a large number of people feel the urge to splurge. The tendency has become so prominent that it has even given rise to a new phrase “revenge spend”. There is nothing wrong with incurring debt or going for staggered payment except that in the days ahead the consumer has to repay. And revenge spending inevitably turns into revenge on one’s own pocket.

But we should not lose sight of the need to save as well. The economy is not out of the woods fully. There is no sign of marked capital expenditure by governments and corporates. Experts are unanimous that it will take some time for demand to revive on a sustainable basis that will lead India Inc to create new capacities that would generate employment.

A third wave can easily upset the revival process. Jobs that are now trickling in, can again start vanishing. One would also need emergency funds to keep their heads above water. Saving and investing, therefore, cannot be given a break. Consumption is necessary but consuming beyond one’s means will be dangerous. Saving is necessary also from the macro-perspective. If gross domestic savings dip, it is bad the economy, exposing the country to external debt burden. Long-term domestic savings are utilised for long-term asset financing like infrastructure that the country needs badly. If domestic savings rates dip, the country has to borrow from abroad.

This festive season let’s also worship the goddess of thrift. The festival of lights should not give way to a festival of darkness.