Struggling savers threaten growth
1 November, 2016, 12:00 am
FOR India’s dream of taking the baton of global growth from China, its savings rate is flashing a warning sign.
Gross national savings as a per cent of the South Asian nation’s gross domestic product will slip this year to 30.2 per cent, the lowest since 2003, and fall further over the next two years, the International Monetary Fund forecasts.
Since companies use domestic savings to fund their capital spending, the fall would increase their vulnerability to external risks — such as uncertainty over the US presidential election or the prospect of monetary tightening there — that could staunch the flow of cheap investment dollars to emerging markets such as India.
It’s a worry for Prime Minister Narendra Modi who aspires to achieve economic growth rates of 8-9 per cent — much higher than the current 7.1 per cent — not only to replicate China’s growth miracle but also to create jobs for the one million people who join India’s workforce every month.