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Economy Feb 3, 2013

'India's savings rate to plunge to 10-year low this fiscal'

The country's savings rate, considered one of the biggest economic strengths, is set to plunge to a 10-year low of 27 per cent by end of this fiscal, Japanese brokerage Nomura has said.

"Based on the available investment data, we estimate that savings will plunge even further to a 10-year low of 27 per cent of GDP in FY13," Nomura India Economist Sonal Varma said in a note.

The domestic saving rate, which had touched a high of 36.9 per cent in 2007-2008, fell to 30.8 per cent of the GDP in FY'12, down from 34 per cent in 2010-11, Nomura said.

PTI

PTI

This is likely to push burgeoning current account deficit (CAD) to historic high of 5 percent in FY'13, the report said.

A country's savings rate usually refers to the percentage of gross domestic product (GDP) savings by households.

According to government data released over weekend, growth in per capita income fell both on current prices and real terms basis in FY12.

The per capita income rose 4.7 per cent on real terms basis to Rs 38,037 in FY'12 as against the 7.2 per cent growth in previous fiscal. Similarly, on current prices basis, it grew by only 13.7 per cent as against 17.1 per cent in FY'11.

It can be noted that this set of data has been accompanied by an increase of nearly 8 per cent in inflation and choppy financial markets.

According to analysts, the slowdown in the savings rate takes resources away from investment, which is necessary for a developing country like India and this in turn, results in greater dependence on foreign capital.

PTI

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