That raises the stakes for Narendra Modi government, which wants to channel more savings into investments that can generate both growth and jobs, to boost chances of winning a second term after its landslide victory in 2014.

On paper, India's households have more reason than ever to save. But convincing them that the central bank can keep inflation low is proving difficult, hindering the country's ambitious growth plans.

Now inflation is around record lows and gold and property prices are languishing.

But a lack of confidence that inflation will stay muted, combined with lacklustre income growth, means India's overall savings growth rates are at the weakest level in years, following five years of decline.

"If the government really wants to propel savings in the economy, it would be the best time to roll out more instruments like the tax free bonds...or to increase the investment limit into tax-free provident funds," said Deepti Taneja, a 32-year-old New Delhi college professor.

Making it easier for some 18 million state and local government employees, like Taneja, to save more, the government pay commission, which reviews public sector salaries every few years, has recommended an increase of several billion dollars.

If not enough of the rise in incomes goes toward savings it could lead to other problems for the economy.

There is work to do. The World Bank estimates the gross savings rate - corporate, government and domestic savings - dipped below 30 percent in 2014 for the first time in over a decade.

Bank deposits, a proxy for financial investments by India's conservative households, grew just 10.6 percent in the September quarter. That is well below expected capacity, which some analysts put at 1.5 times economic growth: closer to 15 percent.


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