Savings India’s
Household savings rate plunges to 15 year
low
India’s slowing economy took a toll on much-needed savings too, with the savings rate touching a 15 year low, and household savings also falling.
This
has weakened India’s macro-economic position which is already hobbled by low
investment and rising external borrowing to fund capital needs.
Household savings also declined as
consumers spent more in purchasing durables and travelling.
Indian households contribute to
about 60% of the country’s savings.
India’s
gross savings fell to 30.1% of the gross domestic product in fiscal 2019 from
34.6 % in fiscal 2012, and 36 % in 2007-08, data from the Central Statistical
Organisation shows.
The
previous low was 29% in 2003-2004. As a per cent of GDP, household savings fell
from 23% in 2012, to 18% last year.
A falling
savings rate could lead to Indian companies ending up borrowing more from
overseas markets, weakening India’s external position as it would raise the
nation’s external debt.
India’s
external borrowing last fiscal rose to $543 billion, from $475 billion in 2015,
data from RBI shows.
Economists
also attribute the current slowdown in the economy partly to the fall in the
savings rate.
When
compared to BRICS economies and other emerging market peers, India stands out
favourably.
Brazil has
a savings rate of 16% of GDP, Mexico 23%, and the Philippines 14.2%. But bigger rival China is at 46%, data with
the World Bank shows.
SRC: ET
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