AGARTALA, Feb 21 (TIWN): Side effect of slowdown hits Common men and Commodity price hikes one of the chief reasons behind drops of savings account. In case of Tripura, slowdown, joblessness, downed incomes, drop in Govt given works already drowned the economy, suicides reported but what is more dangerous is an “economic disaster” ahead due to the slowdown.

This has been the wise advice that small town parents have long given to their kids going to big cities for taking up a job. As Union finance minister, Pranab Mukherjee, the former President, offered a similar advice.

As another economic slowdown continues to extend, savings have taken a big hit. India's savings rate has hit a 15-year low in the middle of economic slowdown.

India's gross savings has fallen to 30.1 per cent of the gross domestic product, as on March 1, 2019. At 29 per cent, the previous low as witnessed in 2003-004. There has been a general trend of decline in the savings rate in the past few years. It was at over 37 per cent in 2007-08 which fell to 32.12 per cent in 2013-14. It has shown upward growth only twice since - in 2014-15 and 2017-18.

2013-14 - 32.12

2014-15 - 32.24
2015-16 - 31.09
2016-17 - 31.35
2017-18 - 32.39
2018-19 - 30.11

At present, the share of household savings in India's savings is 60 per cent. But seen against the scale of GDP, household savings as percentage of GDP has declined from 23 per cent to 18 per cent in 2019.

There are two common explanations - or both could be at play -- for this decline. That people are shopping than they previously did. Secondly, the cost of essentials such as housing, health, education, commutation etc has substantially increased. While inflation supports the second explanation, the figures of consumption show a decline. This connects lower savings to rising unemployment or better say, disguised unemployment.

The cumulative outcome is that people have less money in pockets to support the daily requirements of their families - on account of unemployment, less remunerative jobs and consequently more dependent members. This explains decline in savings.

Now, why should it bother you and the government?

year low and it's a cause for worry

Money saved today is wealth created tomorrow. Indians are world famous for saving for their retirement or some rainy day. The first generation of salaried class in Independent India had the memories of poverty and economic miseries fresh. They took to savings and trained the next generation in the same economic life skill.

This helped India's national economy even though the individual saving money never knew that she was building the nation. Savings create a pool through monies put in the banks. This is the low cost fund ready for investment. A growing economy like India needs more investments to sustain high growth rates or come out of periodical slowdowns.

If domestic savings are not enough, money for investment comes through borrowing from outside. Foreign borrowings come at a higher rate of interests. This also weakens India's national position by pushing external debt higher.