Context-

• The economy of a country is also assessed on the basis of its domestic savings, per capita income and purchasing power.
• But domestic savings in India are continuously declining.
• According to the report released by RBI, the country's net domestic savings was 7.2 percent of the GDP in 2021-22, which has further declined this year to almost 5 decade low of 5.1 percent of the Gross Domestic Product (GDP).
• The country's net domestic savings in the financial year 2022-23 have been 19 percent less than last year.

 Reason for decline in savings -

• Rising inflation is largely responsible for the decline in savings and increase in debt.
• Apart from this, people have become very conscious since the pandemic, hence they are avoiding risky investments.
• Secondly, the interest rate on savings accounts is not very attractive, hence people are investing more in securities etc.

Finance Ministry's argument -

• Indians are currently investing in other financial products as well as buying homes and vehicles.
• The Finance Ministry said that people's savings have not decreased but their attitude towards investment has changed.
• Now people are investing their savings in different financial products like mutual funds and the stock market for saving.
• The way forward -
• The continuous decline in domestic savings, which has a significant share in the total savings of the country, is a matter of concern not only for the lower and middle class but for the entire economy.
• The government will have to maintain a better national savings rate to avoid the risk of recession.
• In favour of this, economists clearly say that the global recession of 2008 had less impact on India because the domestic savings of Indians were in a strong position.
• As a result, the government should increase interest rates on savings schemes in view of economic and social security needs.
• Along with this, the country's economy will get a boost through savings promotion.

 Exam oriented Static facts

 RBI -

• Headquarters-
• Mumbai
• Established-1 April 1935
• Governor - Shaktikanta Das
• Currency – Indian Rupee (₹)