India’s household savings have been declining
since the financial year 2009-10. From an all-time of 25.2 percent in 2009-10,
the household sector savings rate declined to 21.9 percent in 2012-13 as a
percentage of GDP at current market prices.
Household savings consist of financial assets
and physical assets. Interestingly, households in recent years have shifted
from financial assets to physical assets, such as real estate and gold. Stung
by excessive inflation, low real interest rates and moribund stock market, they have no choice but to
shift their savings to physical assets.
After reaching an historic high of 12.0 percent
in 2009-10, the financial assets’ share in GDP has come down drastically to 7.1
percent in 2012-13. The trend is just opposite for physical assets, whose share
in GDP has enhanced from 13.5 percent in 2008-09 to a record 15.8 percent in
2011-12 before falling to 14.8 percent in 2012-13.
It will be interesting to watch what the new
finance minister Arun Jaitley will do to stimulate household sector’s financial
assets, while presenting the 2014-15 budget tomorrow.
- - -
Some of my Tweets on Economic Survey 2013-14:
Good that the @narendramodi gov't is making all the noises about fiscal consolidation, which is quite necessary after years of profligacy.
— RamaKrishnaVadlamudi (@vrk100) July 9, 2014
Hope #Modi govt will stick to the path of fiscal consolidation for the first two years before they go on spending binge before 2019elections
— RamaKrishnaVadlamudi (@vrk100) July 9, 2014
Hope the primacy given to public sector will be removed. But it would be delusional to think that #Modi gov't will sell off PSUs summarily!
— RamaKrishnaVadlamudi (@vrk100) July 9, 2014
Wish rich and fertile farmers' agri-income is taxed. But no right-thinking person would assume it would be touched in this #Budget2014.
— RamaKrishnaVadlamudi (@vrk100) July 9, 2014
One of the most vital areas to enhance productivity gains and GDP growth is education and re-skilling. Hope #Budget2014 focuses on it!
— RamaKrishnaVadlamudi (@vrk100) July 9, 2014
Sadly a majority of our subsidies go into the pockets of the privileged classes at the cost of the underdogs. Will #Budget2014 reverse this?
— RamaKrishnaVadlamudi (@vrk100) July 9, 2014
Massive reforms in both direct and indirect taxes are required to boost India's GDP growth and uplift vast sections of society. #Budget2014
— RamaKrishnaVadlamudi (@vrk100) July 9, 2014
Priorities for the #Modi gov't (PDF): http://t.co/Wly0hCaGE0 #EconomicSurvey May take about an hour to read this.
— RamaKrishnaVadlamudi (@vrk100) July 9, 2014
Infrastructure credit as a % of total bank credit in India:
2004: 4.4%
2007: 7.4%
2010: 11.7%
2013: 13.9%
— RamaKrishnaVadlamudi (@vrk100) July 9, 2014
Indian Rupee-US Dollar Volatility:
May 2003: 1.84%
March 2007: 3.87%
March 2014: 8.65%
— RamaKrishnaVadlamudi (@vrk100) July 9, 2014
Gross Domestic Savings as a % of GDP at current market prices:
1950-51: 9.5
1960-61: 11.6
1970-71: 14.3
1980-81: 17.8
1990-91: 22.9
1/2
— RamaKrishnaVadlamudi (@vrk100) July 9, 2014
India Domestic Savings as a % of GDP at current market prices:
2000-01: 23.7
2003-04: 29.0
2007-08: 36.8
2010-11: 33.7
2012-13: 30.1
2/2
— RamaKrishnaVadlamudi (@vrk100) July 9, 2014
India Gross Fixed Capital Formation as a % of GDP:
1950-51: 9.3
1960-61: 12.8
1970-71: 13.6
1980-81: 17.9
1990-91: 23.8
1/2
— RamaKrishnaVadlamudi (@vrk100) July 9, 2014
India Gross Fixed Capital Formation as a % of GDP:
2000-01: 22.7
2003-04: 24.5
2007-08: 32.9
2010-11: 30.9
2012-13: 30.4
2/2
— RamaKrishnaVadlamudi (@vrk100) July 9, 2014
India's domestic savings & gross fixed capital formation reached a peak, in 2007-08, of 36.8% & 32.9% of GDP respectively. (Previous tweets)
— RamaKrishnaVadlamudi (@vrk100) July 9, 2014
The decline of savings/investment started with P.Chidambaram's 2008-09 awful budget (farm loan waivers, 6th Pay Commn) & continued till now.
— RamaKrishnaVadlamudi (@vrk100) July 9, 2014
It's an irony Indians invest their savings in real estate/gold, with no deposits in banks, but expect the gov't to spend on infrastructure!
— RamaKrishnaVadlamudi (@vrk100) July 9, 2014
Where will money the come from if Indians invest all in RE/gold? They can't be fully blamed for this. Their strategy worked till last year.
— RamaKrishnaVadlamudi (@vrk100) July 9, 2014
Their investments in gold/real estate worked very well for 10 years till 2013. Dejected with inflation, they took asylum in physical assets.
— RamaKrishnaVadlamudi (@vrk100) July 9, 2014
"Dividend distribution tax (DDT) need to go" Para 2.59/page 40 (PDF) http://t.co/Wly0hCaGE0 Will dividend be included as ord inc? @VetriSmv
— RamaKrishnaVadlamudi (@vrk100) July 9, 2014
#EconomicSurvey talks of establishing a Productivity Commission to review laws/regulations & organisation structures & improve productivity.
— RamaKrishnaVadlamudi (@vrk100) July 9, 2014
India's budget should follow accrual-based accounting process rather than the currently-used cash-based system. #EconomicSurvey
— RamaKrishnaVadlamudi (@vrk100) July 9, 2014
Due to the distorted urea subsidy, farmers & the Indian gov't are wastefully spending Rs 2,680 crore & Rs 5,860 crore respectively for this.
— RamaKrishnaVadlamudi (@vrk100) July 9, 2014
With zero outcomes, public schools mostly exist for the benefit of ineffective & truant school teachers/staff, rather than for students.
— RamaKrishnaVadlamudi (@vrk100) July 9, 2014
In recent years, while the spending per child in gov't schools has risen sharply, the learning outcome has declined to 32.4% #EconomicSurvey
— RamaKrishnaVadlamudi (@vrk100) July 9, 2014
#FinancialRepression With mandatory/prudential norms (eg, statutory liquidity ratio) India's Union/State govts are pre-empting all resources
— RamaKrishnaVadlamudi (@vrk100) July 9, 2014
With #FinancialRepression, Union/State govts are crowding out private sector, which is forced to borrow from abroad entailing forex risks.
— RamaKrishnaVadlamudi (@vrk100) July 9, 2014
Greater policy stability, higher long-term growth & a legal/regulatory framework that strengthens a mkt economy will help revive investment
— RamaKrishnaVadlamudi (@vrk100) July 9, 2014
The first wave of infrastructure investment in India has been grounded in an array of design flaws that now need to be addressed.
— RamaKrishnaVadlamudi (@vrk100) July 9, 2014
GDP growth has slowed due to domestic & external factors. Two successive years of sub-5% growth is witnessed for the first time in 25 years.
— RamaKrishnaVadlamudi (@vrk100) July 9, 2014
India’s share in world exports & imports increased from 0.7% & 0.8% respectively in 2000 to 1.7% and 2.5% respectively in 2013.
— RamaKrishnaVadlamudi (@vrk100) July 9, 2014
There has also been marked improvement in India’s total merchandise trade to GDP ratio from 21.8% in 2000-01 to 44.1% in 2013-14.
— RamaKrishnaVadlamudi (@vrk100) July 9, 2014
Yield levels in Indian agriculture are still much lower than global standards. No significant changes in rice & wheat yields after the 1980s
— RamaKrishnaVadlamudi (@vrk100) July 9, 2014
While cotton yields have shown big leap over the last decade largely due to Bt cotton; some increase is also seen in coarse cereals & pulses
— RamaKrishnaVadlamudi (@vrk100) July 9, 2014
Till 7 May 2014, a total of 67.41 lakh members have been enrolled under the National Pension System (NPS) with a corpus of Rs 51,147 crore.
— RamaKrishnaVadlamudi (@vrk100) July 9, 2014
During 2004-05 to 2011-12, employment growth (CAGR) was only 0.5%; compared to 2.8% during 1999-2000 to 2004-05. #EconomicSurvey
— RamaKrishnaVadlamudi (@vrk100) July 9, 2014
#India Coal Output (million tonnes)
1998-99: 292
2003-04: 361
2008-09: 493
2009-10: 532
2010-11: 533
2011-12: 540
2012-13: 556
2013-14: 566
— RamaKrishnaVadlamudi (@vrk100) July 9, 2014
As can be seen in the previous tweet, India's coal production has stagnated between 2009 and 2014 creating problems for power cos & economy.
— RamaKrishnaVadlamudi (@vrk100) July 9, 2014
The data provided in the previous tweets is sourced from India's #EconomicSurvey 2013-14.
— RamaKrishnaVadlamudi (@vrk100) July 9, 2014
Disclaimer: The author is an investment analyst, equity
investor and freelance writer. The author has a vested interest in the Indian
stock markets. This write-up is for information purposes only and should not be
taken as investment advice. Investors are advised to consult their financial
advisor before taking any investment decisions. He blogs at:
http://ramakrishnavadlamudi.blogspot.in/
http://www.scribd.com/vrk100
Connect
with him on twitter @vrk100
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