India's Saving Investment Gap

 

India’s saving investment gap

India’s saving rate at % of GDP is increasing at the rate of 2.10% per year from 2000 to 2012 , on the other hand  , Investment as % of GDP  is stepping up at the rate of 3.70% per year during the same period. This domestic imbalance creates several problems in macro  economic variables which ultimately produces disequilibrium of the economy.India’s saving Investment gap is accelerating since 2004 ,but it was favourable before 2004.In the figure the blue line shows the investment rate where as red line is the saving rate .It is very much clear in the figure that the gap is widening .

          The government should observe this situation seriously and take appropriate measure to restore balance in domestic economy. In China, Korea and in some other Asian economies the situation is reverse, that why they are easily overcoming the external balance. If we are able to balance this fundamental gap ,then we may tackle the unemployment problem more easily. Fiscal policy alone cannot make up this gap but needed suitable  monetary policy also. Obviously , the integration of external balance policy as well as fiscal monetary policy will be justified.Moreover, nobody cares.