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'India Inc propels up savings, investment rates'

There was over 30% growth in investment, a trend that will improve the economic growth in the years to come, the Survey said.

india Updated: Feb 27, 2006 16:23 IST

Higher individual income and corporate profits propelled up savings rate to 29.1 per cent paving way for significant growth in investment at over 30 per cent, a trend that will improve the economic growth in the years to come, the Economic Survey said.

The high level of saying coupled with a buoyant stock market and controlled inflations would augur well for the economy, the Survey concluded.

"A pick up in investment, reflecting the high business optimism, not only strengthened industrial performance but also reinforced the growth outlook itself," the Survey presented to Parliament said.

Investment rate surged from 27.2 per cent in 2003-04 to 30.1 per cent in 2004-05 mainly on account of private investment growing at 19.7 per cent.

"There is a clear need to enhance investment. Higher investment is likely to result in higher imports of basic, intermediate and capital goods and trade and current account deficit," the Survey said.

The Survey attributed rise in savings rate from 26.5 per cent in 2002-03 to 29.1 per cent in 2004-05, to rise in public and corporate savings even though growth in household savings was less than that of the economy.

"Savings by private corporate sector -- reflecting high retained earnings from their higher profits -- grew rapidly to increase its share in GDP from 4.4 per cent in 2003-04 to 4.8 per cent in 2004-05," it said.

Public savings also rose from one per cent of GDP in 2003-04 to 2.2 per cent in 2004-05 mainly due to reduction in dissavings by public authorities and higher savings by non-departmental enterprises, it said.

With rise in savings and investment rates, reduction in government's deficits and speedy reforms, the Survey said the country can sustain 8-10 per cent GDP growth.

First Published: Feb 27, 2006 16:23 IST