THE GROWTH PARADOX : - BY INVESTMENT OR BY CONSUMPTION ?
The acceleration of growth of the economy is mostly hampered by the weakening of the savings & investments. Savings & investment rates had steadily gone up from around 10% of the gross domestic product (GDP) in the early 1950s to touch peak levels of close to 40% of the GDP at the time of the global financial crisis in 2007–08. However, it has plummeted and stagnated since then. The savings rate has slumped from the peak level of 37.8% of the GDP in 2007–08 to 30.2% in 2021–22, a decline of 7.6 percentage points. The fall in investment rates has been even sharper with the numbers going down from 39.8% of the GDP in 2010–11 to 31.4% in 2021–22, a decline of 8.4 percentage points over the period. The average savings rate shot up from 24% of the GDP in the first decade of reforms to 34% in the second decade but then declined to 29% in the last decade, mainly on account of the slowdown in growth and per capita incomes. Similarly, while investment rates have moved up from 26% ...