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Composition of Domestic Savings
 

  • India, domestic savings comprises of savings from household, private corporate and public sector.
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  • Household sector dominates with around 70% contribution to total gross savings. It consists of physical and financial savings.
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  • Private corporate sector contributes to around 20% followed by public sector of around 4% to total gross savings.
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  • Chart below shows broad break up of components comprising India’s domestic savings (data is for FY13)

 

 

  • Chart below shows sector wise contribution as a percentage to total gross domestic savings over the years.

 

 

Source: RBI

 

  • From the chart above, we can see that household sector has predominately been the largest contributor to domestic savings.
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  • Over the years, contribution of private corporate sector has increased from 11% in 1990 to 23% in 2013.
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  • Public sector contribution has been the lowest and in years from 1999 to 2003 has been negative.
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  • Negative contribution means government has consumed more than its income.
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  • In 2010, public sector contributed nothing to domestic savings.
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Trend in Gross Domestic Savings
 

 

Source: RBI

 

  • Chart above shows trend in India gross domestic savings-total and sector wise as % of GDP.
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  • We can observe, from 1990 till 2000 gross domestic savings as % of GDP has been in the range of 20 to 25%.
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  • Gross domestic savings has been increasing from 2000with highest savings rate of 36.8% in 2008.
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  • However, post 2008, domestic savings rate has been declining and FY2013 was 30.1% of GDP.
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  • The key reason for decline in savings rate is high inflation and negative or low real returns.
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  • On account of increasing consumption expenditure, domestic savings have reduced.

 

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