ABSTRACT
This chapter analyzes the trends in savings and investment in India. Low income levels result in low savings and hence low levels of investment and incomes. Savings and investment have been central to India's economic strategy. The higher the proportion of initial investment allocated to the capital goods sector, the higher the flow of capital goods and investment in the subsequent periods. The emphasis of the model was on structural bottlenecks, including the limited scope for generating additional foreign-exchange earnings through growth in exports, and the imperative need for a growing supply of domestically-produced capital goods to sustain investment and growth. The household sector accounts on average for more than three-quarters of total domestic savings in India. Public borrowing, by providing acceptable government securities, may reduce consumption and promote savings. The statistical measures of the productivity of investment usually employed are the marginal and average capital-output ratios.
