Saving and Investment in India-Trends, Structural Composition and Inter-Relationships

The rates of both saving and investment generally showed rising trends during the four decades of planning in India. In the aggregate saving, the household sector makes the major contribution, followed by the contribution of public and private corporate sectors. In the household sector, the proportion of its saving in Capital Certain and Return Riskless Financial Assets was predominantly higher than that of Capital Uncertain and Return Risky Financial Assets. The public sector invested mainly in public utility and infrastructural industries, while the private sector invested mainly in the industries yielding direct and high returns. The Cointegration test indicated that the saving and investment were characterised by the long-run equilibrium relationship and hence there was weak mobility of international capital. The Granger test with ECM indicated that there was unidirectional causality flowing from domestic saving to investment.