Kumud Das Mumbai

Thecountry's gross savings rate stands at around 29-31 per cent of GDP, which is higher than the world average (26 per cent) and South Asia average. It outperforms major economies like Germany (25 per cent), the UK (18 per cent), the US (17 per cent), and South Africa (16 per cent), while trailing high-savers such as Singapore (40-58 per cent range in peaks), China (43 per cent), and Indonesia (35-37 per cent).

Malaysia and Thailand are comparable or slightly lower. It captures India's relatively strong savings position compared to Western peers, reveals a study by World Bank and Crisil figures.

Talking to Bizz Buzz, Shiva Kumar, former MD, State Bank of Bikaner & Jaipur, says, Western economies function on consumption, while Asian economies function on savings. Hence their savings rates are not comparable.”

For India, savings rate around 32-35 per cent would be desirable to sustain 7-8 per cent of GDP. India's gross domestic savings rate is one of the country's key macroeconomic strengths because it provides a large pool of domestic capital to finance investment without excessive reliance on foreign savings.

Anil Bhansali, Head of Treasury, Finrex Treasury Advisors says “A savings rate of around ‘29–31 per cent of GDP’ implies that nearly one-third of the country's annual economic output is available for investment in infrastructure, manufacturing, housing and productive assets growth.” Citing the reasons behind it, he says that, it is due to a host of factors.

Indian households contribute the largest share of national savings through bank deposits, insurance and pension funds, provident funds, mutual funds, gold and real estate (though not all are counted as financial savings).

Households account for roughly 60 per cent of India's gross domestic savings, although the mix between financial and physical assets changes over time.

Corporate savings have increased in the country. Improved corporate profitability, stronger balance sheets and lower leverage since the late 2010s have supported retained earnings, boosting corporate savings.

Public sector savings have improved. Fiscal consolidation by both the central and state governments in recent years has helped reduce dissaving by the public sector, although government saving remains much lower than household and corporate saving. Still, India still trails China and Singapore. China's extraordinarily high savings rate reflects high household precautionary savings because of lower social welfare coverage, large retained earnings by state-owned and private enterprises, historically high current account surpluses and a long period of investment-led economic growth.

Singapore benefits from mandatory retirement savings through the Central Provident Fund (CPF).

Moreover, the country boasts of having strong fiscal surpluses, high corporate profitability and large external surpluses. MV Hariharan, former treasury head, State Bank of India says, “Benchmarking savings rate in a very relative way is fine. But then, the Indian economy, the Indian population, the Indian demography, the Indian banking, the financial situation, the per capita income are all not being considered. These are all very generic and sweeping statements.”

RBI data showed that loans taken for consumption purposes had the dominant share, with personal loans accounting for 22.3 per cent.