Fall in rate of saving can pull down growth story of the India in coming months. India's economy which was growing with GDP of nearly 8% in consequent fiscal years-but a 7.2% slowdown in savings rate could prevent it from rising substantially more than the 6% defeating the expectation of the government.
Growth in savings fell to 13.7% during 2010-11, compared to 21% in the previous year because of high inflation, pulling down the share of gross domestic savings in GDP by 1.5%, according to national accounts quick estimates released on Tuesday.
The major slowdown was seen household savings - where the growth declined from 23% in 2009-10 to 7% 2008-2009. Private corporate sector also show drastic fall in savings from 28% in 2009-10 to 13% in 2010-11.
Kaushik Basu, chief economic advisor to the finance ministry said, "We expect growth in 2012-13 to be higher than current year, but we won't be close to growth potential 8.6%."
Gross domestic savings and gross capital formation made up 32.3% and 35.1%, respectively of GDP during 2010-11. The drop in savings is not good news," said Basu. The government, however, assured that it would do its best to put growth back on track. "We will put all our might behind growth," said Basu.
High savings rate help government of India to domestically finance a major part of its investments, and in infrastructure projects and, a slow down in savings would led the lower potential growth rate which may effects the GDP growth badly
"High inflation not only erodes returns on savings, so households preferred to invest in physical assets like gold, silver, real estate which offer better returns.
Growth in savings fell to 13.7% during 2010-11, compared to 21% in the previous year because of high inflation, pulling down the share of gross domestic savings in GDP by 1.5%, according to national accounts quick estimates released on Tuesday.
The major slowdown was seen household savings - where the growth declined from 23% in 2009-10 to 7% 2008-2009. Private corporate sector also show drastic fall in savings from 28% in 2009-10 to 13% in 2010-11.
Kaushik Basu, chief economic advisor to the finance ministry said, "We expect growth in 2012-13 to be higher than current year, but we won't be close to growth potential 8.6%."
Gross domestic savings and gross capital formation made up 32.3% and 35.1%, respectively of GDP during 2010-11. The drop in savings is not good news," said Basu. The government, however, assured that it would do its best to put growth back on track. "We will put all our might behind growth," said Basu.
High savings rate help government of India to domestically finance a major part of its investments, and in infrastructure projects and, a slow down in savings would led the lower potential growth rate which may effects the GDP growth badly
"High inflation not only erodes returns on savings, so households preferred to invest in physical assets like gold, silver, real estate which offer better returns.
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