Decoding Slowdown: Dip in household savings, investment an indicator of structural economic slowdown
The economic slowdown is structural as a sharp decline in household savings and investment since FY12 would indicate. This calls for a significant boost to capital expenditure by the government
- Sep 20, 2019,
- Updated Sep 21, 2019 8:29 AM IST
The very first chapter of the Economic Survey 2018-19 sets the tone for a policy approach by asserting that international experiences show higher savings and investment are absolutely critical for a sustained high growth. China, for example, "has relied primarily on higher savings and investment" the rates for both reaching about 45% of its GDP even in 2017 - when its growth had relatively moderated.
While advocating for a China-like investment-driven approach to growth, the Economic Survey, however, lays greater emphasis on savings than investment, saying that global studies have shown that though growth is associated with "a rapidly rising investment rate" it is associated with "even more steeply increasing savings rate". It cites a study of 62 episodes of growth spurts between 1960 and 2011 among non-OECD countries to substantiate its point.
The very first chapter of the Economic Survey 2018-19 sets the tone for a policy approach by asserting that international experiences show higher savings and investment are absolutely critical for a sustained high growth. China, for example, "has relied primarily on higher savings and investment" the rates for both reaching about 45% of its GDP even in 2017 - when its growth had relatively moderated.
While advocating for a China-like investment-driven approach to growth, the Economic Survey, however, lays greater emphasis on savings than investment, saying that global studies have shown that though growth is associated with "a rapidly rising investment rate" it is associated with "even more steeply increasing savings rate". It cites a study of 62 episodes of growth spurts between 1960 and 2011 among non-OECD countries to substantiate its point.