Please read below key excerpts (Selection & Emphasis Ours) on two blogs published by Marcellus Investments on how the inflow in financial savings can grow 3 times from today level in coming 10 years.
Key Excerpt 1 - On Behavioral Change happening in small towns of India
"The RBI’s remarkably well researched August 2017 Household Financial Committee report says that 95% of Indian households’ stock of wealth is in physical assets. As most people now realize that physical assets struggle to keep up even with the rate of inflation, SME owners are first turning their black money savings into white money by paying Income Tax (as attested by the growing number of Income Tax payers even in the sluggish economic climate). Then they are searching for providers of financial savings products who can give them steady compounding."
Key Excerpt 2 - On The Math behind how inflows into financial saving can go from 200 Billion to 600 Billion Dollars
"If India’s per capita income – which is around US$2000 today – grows at 5% per annum (which is what it has done in the last 10 years) over the next 10 years, the country’s per capita income will be around US$3,300. Assuming a population of 1.5 billion, this gives India a US$5 trillion GDP ten years hence. Assuming further that our household savings rate will stay at broadly 20% a decade out gives us annual household savings of US$1 trillion. At present, roughly half of household savings in India are in financial assets (the rest is in physical). If this ratio persists, then a decade out, annual household savings should be around US$500 billion in India.
However, such a figure ignores the balance sheet shift that we highlighted in the opening paras of this note. As SME owners realise that they need to save more through financial rather than physical savings, they will start selling their real estate to invest in financial assets.
The question is at what rate will this shift take place? As per RBI data, presently 95% of Indian wealth is in physical assets. If this number drops by 1% point per annum (which is what our reading of the Credit Suisse World Wealth Yearbook suggests) then that implies that around $100 billion per annum could get added to the annual flow into financial savings.
With potentially $500 billion of financial savings arising from annual income and with potentially another $100 billion arising from the balance sheet shift (from physical to financial), our back-of-the-envelope estimates suggest that the annual flow into financial savings could triple over the next decade (from US$200 billion today to US$600 billion). "