Savings rate have accelerated in last 8 years now showing sign of structural decline or is it just a cyclical? lets connect the dots and validate the information.
Beside Incomes, Interest rates, Inflation and demographics also drive household savings, High inflation and negative real rates have dented savings. Balance act of Domestic savings are required to fund investments which other wise must be finance through foreign capital.
World bank report indicate downtrend if we dissect further we observe the Savings decline needs to be arrested at the earliest so can we expect savings trend to improve in growth driven environment. any further rate cuts on deposits eventually alienate the savers,
Encouraging Savings and taking corrective action is underway and signs of improvement are reflecting in form of reduced Inflation rates, Inflation have been tamed so household savings can increase and growth mobilized.
With inflation declining faster than rates in past 2 years household have parked more funds in financial assets rather than physical assets(gold & property) but its painstakingly slow, Public sector wage increase alone will not suffice unless domestic private sector is able to pick the baton and deliver.
Push for Savings needs greater momentum, this will have to come through concerted efforts to lift incomes and job creation.
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