The impact of the economic downturn: The country's savings rate drops to 15 years

Mumbai, Ta. 19 February 2020, Wednesday

The impact of the country's economic downturn has also been seen on the savings rate. The country's savings rate has fallen to a five-year low and domestic savings are also declining. This has weakened India's macroeconomic status, which is already facing the challenges of low investment and rising foreign debt.

Domestic savings have also declined due to increased consumption of travel and travel expenses. Domestic savings account for 5% of the country's total savings. Compared to rival countries like Brazil, India is looking favorably.

If India wants to achieve steady growth, it will have to raise investment rates. But this requires funding, said one analyst. India's gross savings rate fell to 9.5 percent of GDP in fiscal year 1, compared to 5 percent in fiscal year 1 and 5 percent in 1-3, according to data from the Central Statistical Organization. Earlier, the savings rate had been as low as 5% in the last 2-3 years.

The domestic savings rate, which was 2 percent of GDP in the fiscal year, fell to 5 percent in the last financial year. Due to the reduction in savings, Indian companies may have to turn their financial needs towards raising funds from abroad, which may weaken India's external position as this will increase the country's foreign debt.

The analyst said the current account balance should be reduced or the current account deficit should be increased to increase investment while savings are falling. In the last financial year, India's foreign debt soared to $ 4 billion, compared to $ 5 billion in the first five years. The current downturn can also be attributed to some extent to the reduction in savings rates. In other emerging countries, Brazil's savings rate is 5% of GDP, Mexico's 5% and Philippines's 8%.