The air of domestic savings, called the life of the Indian economy, has gone out. In five years, the total liability has increased by 58 percent to Rs 7.4 lakh crore, while this increase was just 22 percent in 2017, a year earlier. This figure is from the research wing of State Bank of India, the country's largest government bank.
During this five years, the debt of the families has doubled, while the income spent during this period called Disposable Income has increased by just one and a half times. As a result, there has been a big fall of 4 percent in the total savings of the country and it has been reduced to 30.5 percent from 34.6 percent.
The biggest reason for this big drop in savings is the decline in savings domestically. The savings of families have fallen by about six per cent (GDP) in this five years. The domestic saving rate which was 23.6 per cent in the financial year 2012, came down to 17.2 per cent in 2018.
The effect of a huge drop in savings has started appearing on the economy.
State Bank of India, the country's largest bank, says that simply reducing the loan rate will not solve the case, now the government will have to take some more initiatives. The bank said in its research note that after the removal of capital gains tax, there was some impact on financial savings in 2018, but it decreased in 2019.
The bank says that in rural areas, the government should increase some expenses to increase the demand. In the scheme for financial assistance to farmers, the farmers have been allocated less than the target so far. Statistics from the PM-Kisan Portal show that about half of the farmers have been registered with the target. As of June 2019, 6.89 crore farmers were validated, while the target was 14. 6 crore. By increasing this, rural demand can be increased.
The amount allocated in the budget has been recorded, especially in capital expenditure. So far only 32 percent of the government's money has been spent. Whereas 37.1 percent was spent during this time last year.
Private investment has also come down drastically. The place of 50 percent during 2007 to 2014 has been reduced to 30 percent during 2014 to 2019.
These figures clearly show that it is not just a financial crisis and its roots are much deeper. Now it has to be seen how much bailout packages issued by the government help in reviving it.
