India's savings crisis

Why read this story?

Editor's note: Household savings in India have been in a tailspin over the past five years, hitting a nearly two-decade low. The household savings rate stood at 17.2% of gross domestic product in 2017-18; that's only marginally up from 17.1% in 2016-17, which was the lowest since 1996-97, and the savings rate has dropped in almost every year since 2011-12, when it was 23.6% of GDP. Why does this matter? The domestic savings rate (households + companies + public sector) has fallen almost seven percentage points since 2008-09 In a developing economy, growth is a result of investments that feed on domestic savings. Maintaining healthy savings, therefore, is essential for growth, especially when the economy is going through turmoil. India’s GDP growth in the year ended March 2019 was 6.8%, the lowest since 2014-15. In the quarter ended June, it fell to 5%. And there is no sign of a quick recovery. The auto sector is facing its biggest crisis in over two decades, shedding hundreds of thousands of jobs this year alone. Real estate is languishing, with more than 1.2 million …