The Indian savings rate has plummeted in the last decade from 38% to 30%. Those Millennials that do save with formal financial institutions, find mutual funds and SIPs more suited to their lifestyle in contrast to Boomers who support the stock market and bonds.
Joseph Schumpeter, a leading economist, highlighted relationships between mathematics, statistics, economics and history. He once said that if he had a choice of only one subject, it would be history. Following his advice, I begin my write-up with the economic events that have shaped the financially secure Baby Boomers who are soon going to retire. I will also detail and contrast it to events experienced by millennials such as myself, a generation that the internet describes as urban, avocado-eating, cappuccino-drinking, Uber-pooling consumers who spend more than their parents. I proceed to provide reasons as to why this caricature of our generation is misleading, in light of the fact that Indian millennials differ from global millennials.
The Baby Boomer generation was conceived after the end of the Second World War, seventy-six million strong, born between 1946 to 1964. They have witnessed the first man on the moon, technological progress - particularly in freighting and containerisation - by leaps and bounds, globalisation of production at a scale unprecedented than before as well as capital mobility and the rise of the international financial markets to new heights. Although according to Nancy Salamone, early Boomers have followed their parents, the Silent Generation, by being self-sacrificing, lean risk-takers who built up their wealth by saving most of their income. The late boomers, in contrast, have had to work harder and much longer to amass their wealth. Hence, we can see that even generations have an income divide.
Millennials are the children of the Baby Boomer generation. Millennials have witnessed the invention of the internet and their lives have been dictated by the Global Financial Crisis of 2008-09. In his most recent publication, The Theft of A Decade: How the Baby Boomers Stole the Millennials’ Economic Future, Joseph C. Sternberg explains the situation. He pointed out that during the financial crisis, the experienced Boomers took a cut to their paycheck and replaced many of the millennials who were just starting out in their careers, thus, setting them back and leading them to return to university to gain higher qualifications to be able to match the Boomers’ qualifications. Hence, the millennials haven’t even got the chance to level the playing field with the Boomers. Sternberg links this to poor policy, however, the simple fact is that the Baby Boomers are outliving their parents and thus retiring later, hence, soaking up employment opportunities that would otherwise be awarded to millennials.
The urbane conspicuous consumption patterns do not reflect the vast majority of young Indians, born between 1981 and 1996, who may not have as much disposable income or social access to this type of leisure expenditure, and whose ideas around savings may be invisible within the sort of data collected by big urban financial institutions. As of March 2019, most of India’s 450 million millennials are urban migrants (or immediate relatives of migrants) from rural parts of the country. According to LiveMint, these are the features of many Indian millennials: "a majority rural, one-third have not crossed primary school, only 10-12% are graduates, most who work are in casual labour or petty self-employment, salary earners are in the minority. Being mostly of modest income, and raised by socialist generation parents, they are not trigger-happy spenders." Indian millennials contribute to nearly half of the workforce and 70% of domestic incomes and are strongly influenced by global trends. They are also unique in witnessing the global spread, if not the invention, of the internet in conjunction with the affordability of the latest technology in mobile phones, helping them stay connected on social media, informed and entertained on-the-go.
Education is of prime importance for the Indian millennial and has been the primary factor of rural to urban mobility, perhaps in search of better employment opportunities. However, did you know that the unemployment rate among graduates and postgraduates is three times the national average? Nine million out of fifty-five million are unemployed, as reported by the Centre for Sustainable Employment in 2018. This generation has also borrowed and paid more than any other generation for its education, which affects saving potential.
The Indian savings rate has plummeted in the last decade from 38% to 30%. Those Millennials that do save with formal financial institutions, find mutual funds and SIPs more suited to their lifestyle in contrast to Boomers who support the stock market and bonds. I made an earlier point of how income inequality varies between generations. As with Boomers, the millennials also show a stark difference in saving patterns depending on their income. According to LiveMint, 34% of Indian millennials who earned above Rs 75,000 were more like to save 20% of their income as compared to 10% of Indian millennials who earned below Rs 35,000 were less likely to save 20% of their income.
The concept of Boomers and Millenials with different economic circumstances, aspirations and savings behaviours originated with American demographers writing about the American context. Indian generations have had very different life experiences, so that characterisation may not apply to how we should approach Indian Millenials and Indian Boomers. Like Schumpeter, we should holistically consider India’s unique demography, fiscal policies and post-colonial history, and that how individuals within generations save and spend also depends on their moment in the economic cycle.
Comments
Post a Comment