Savings rate to fall to 10-year low this fiscal: Nomura

Fall in domestic savings rate may push current account deficit to a historic high of 5% in FY’13
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First Published: Sun, Feb 03 2013. 07 51 PM IST
The domestic savings rate, which had touched a high of 36.9% in 2007-2008, fell to 30.8% of the GDP in FY’12, down from 34% in 2010-11, Nomura said. Photo: Priyanka Parashar/Mint
The domestic savings rate, which had touched a high of 36.9% in 2007-2008, fell to 30.8% of the GDP in FY’12, down from 34% in 2010-11, Nomura said. Photo: Priyanka Parashar/Mint
Mumbai: The country’s savings rate, considered as one of the biggest economic strengths, is set to plunge to a 10-year low of 27% by the end of this fiscal, Japanese brokerage Nomura has said. “Based on the available investment data, we estimate that savings will plunge even further to a 10-year low of 27% of GDP in FY13,” Nomura India Economist Sonal Varma said in a note. The domestic savings rate, which had touched a high of 36.9% in 2007-2008, fell to 30.8% of the GDP in FY’12, down from 34% in 2010-11, Nomura said.
This is likely to push burgeoning current account deficit (CAD) to a historic high of 5% in FY’13, the report said.
A country’s savings rate usually refers to the percentage of gross domestic product (GDP) savings by households.
According to government data released over the weekend, growth in per capita income fell both on current prices and real terms basis in FY12. The per capita income rose 4.7% on real terms basis to Rs.38,037 in FY’12 as against the 7.2% growth in the previous fiscal. Similarly, on current prices basis, it grew by only 13.7% as against 17.1% in FY’11.
It can be noted that this set of data has been accompanied by an increase of nearly 8% in inflation and choppy financial markets. According to analysts, the slowdown in the savings rate takes resources away from investment, which is necessary for a developing country such as India and this in turn, results in greater dependence on foreign capital.
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First Published: Sun, Feb 03 2013. 07 51 PM IST
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