India’s domestic savings declines to 30% this fiscal
As per the warnings of India Ratings, the national savings rate will further plunge to 30% or so this fiscal, from 30.8% of the GDP last fiscal, if the advance estimates of national income are considered.
How would it affect Indian economy?
The estimates depict a weak perspective of stabilizing twin deficits. While the estimated investment rate this fiscal is likely to be similar to FY12, an 80 bps rise in the share of consumption expenditure (private and government) will reduce the savings rate further, leading to further widening of the current account deficit which is already prevailing at historic high of 5.3% in Q2.
The domestic saving rate had seen a high of 36.9% in FY08 but since then has continuously plummeted. It declined to 33.8% in FY10 and gained a little in FY11 to 34% but again fell to 30.8 %of GDP in FY12.