Maintaining adequate domestic savings is essential to sound macroeconomic management | The Indian Express

Maintaining adequate domestic savings is essential to sound macroeconomic management | The Indian Express

Written by Dharmakirti Joshi, Adhish Verma |Updated: June 26, 2019 6:42:07 am

The writer is chief  economist, CRISIL.

Verma is economist at CRISIL

Maintaining adequate domestic savings is essential to sound macroeconomic management

Focus should be on lifting savings rate, else there is a risk of private investments being crowded out.

Unfortunately, Indians have been saving less. Worse, our rate of savings has fallen sharply. (Express Photo by Ganesh Shirsekar)

Empirical evidence shows that developing economies have a positive long-term correlation between savings and growth. In a fast-growing economy like India, investments generally outpace domestic savings, and the gap gets funded by foreign savings. This shows up as current account deficit. Maintaining adequate domestic savings, therefore, is essential to sound macroeconomic management — more so in today’s challenging global environment.