Journal of Commerce and Management Thought

Many changes take place in an economy, and in its society, during the course of its growth and transformation from an underdeveloped economy to the state of a developing economy. Changes in the habits of consumption and saving are especially relevant in the context of the growth of the economy, since these changes affect the rate of domestic saving and capital formation in the economy, thereby affecting the rate of its further growth. The rate of domestic saving in India, measured by the ratio of gross domestic saving to the gross domestic product of the country, was increasing since 1991–92 and reached the peak rate of saving of 36.8 per cent in 2007–08. The rate started falling since then and was 30.1 per cent in 2012–13. A phenomenon of savings transition in the country is, thus, evident from these trends in domestic saving in the country. The phenomenon took/takes the form of an initially rising rate of domestic saving that reaches a peak and then declines. Since the Indian economy is still a developing economy, the rate of domestic saving in the country has to be high and should continue to rise or remain at the high rate that it had reached. The downward phase of the savings transition that is being observed in the Indian economy at present has, therefore, to be arrested through appropriate policy measures.