InvestorQ : Why is the Indian rate of savings going down as reported in some newspapers and what could that mean?
Mitali Bhutta made post

Why is the Indian rate of savings going down as reported in some newspapers and what could that mean?

Answer
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Dawn Cherian answered.
7 months ago


That has been a worry for some years now and actually the savings have been falling steadily since the financial crisis of 2007. A recent report brought out by MOSPI and the CSO has shown that the Indian savings rate had plunged to a 15 year low. Indian gross savings fell from 34.6% of GDP in 2012 to just 30.1% in 2019. Such low savings were last seen in 2003. The figure was above 36% in 2007, prior to the financial crisis. Household savings have also fallen from 23% of GDP in 2012 to a new low of 18% in 2019. A high domestic savings rate is essential to finance the investments made by businesses. Else, these businesses will have to start relying on external sources of funding which could have an impact on the current account as well as on the rupee value. Due to a mix of higher inflation and higher household borrowings, there has been a sharp fall in savings of households.