Savings rate likely to rise

A lot of optimism on the economy emanates from the government view that the country's savings and investment have reached a level which a decade ago would have been dismissed as a pipe dream.

The Survey says the savings rate is likely to rise further with the demographic advantage of a higher proportion of working population.

Savings as a percentage of GDP at market price have, however, shown a decline. The gross domestic savings (GDS) at current price in 2008-09 were estimated at Rs 18,11,585 crore, amounting to 32.5 per cent of GDP, as against 36.4 per cent in the previous year. GDS rate fell due to the fall in savings rates of the public sector and the private sector to 1.4 per cent and 8.4 per cent in 2008-09, from 5 per cent and 8.7 per cent, respectively, in 2007-08.

In the household sector, the rate of savings remained same at 22.6 per cent. "Definitional refinements, better estimates of savings and a higher investment denominator due to an increase in the level estimates of GDP have contributed to the lowering of the rate of GDS in the new National Accounting Standards (NAS) series," says the Survey. GDS was overestimated to 2007-08 from 2005-06 in the NAS old series by an average 1.3 per cent.

In the case of investment, which is reflected as gross capital formation, growth declined to 34.9 per cent in 2008-09, from 37.7 per cent in 2007-08. Sectorally, while growth rate of investment in agriculture was higher at 26 per cent in 2008-09, compared to 16.5 per cent in 2007-08, last year saw the investment growth in industrial sector dropping 17.6 per cent. This, though till the previous year investment in the sector had shown more growth than the overall investment rate.