Answer:

High Saving rates have been linked with high growth. The composition of domestic savings in India includes three sources i.e. households, the private corporate sector, and the public sector. National savings rate in India had hit an all-time high of 36.9 per cent in FY08, but has been consistently declining ever since. According to the Economic Survey 2014-15 the gross domestic saving, has declined from 33.9 per cent of the GDP in 2011-12 to 31.8 per cent in 2012-13 and further to 30.6 per cent in 2013-14. Factors that can be attributed for this trend are:

♤ Slowdown in overall economic growth

♤ Diminishing returns on Savings for the Household sector due to factors such as inflation.

♤ Decreasing productivity and profit in the Corporate sector.

As far as the changes in the composition of saving in the last few years is concerned the following can be observed:

♤ Household savings remain the largest contributor but its share has been declining. From 25.9 % of GDP in 2009 to 17.8% in 2013-14.

♤ The corporate sector as part of the Domestic savings has seen and upward trend and constitutes the second largest share after the household sector.

♤ The share of Public sector savings has seen a consistent decline over the years From 5% of the GDP in 2008- it came down to 1.6% in 2013-14.

A sharp decline in the household savings and a decline in financial savings (bank deposits insurance, shares etc) vis-à-vis physical savings (Real Estate, Gold etc.) has been identified as key areas of concerns. Following Suggestion can be made to better channelize household savings in India:

♤ Curbing inflation

♤ Expanding financial inclusion

♤ Offering new products such as inflation indexed bonds.

♤ Improving saver access to financial products.