Clawing the economy back to an 8 per cent growth path will require bringing savings and investment rates closer to 35 per cent on a sustained basis, which were 30.2 and 29.6 per cent, respectively, in FY22, according to a report.
As per India Ratings, a large part of investments will have to be in infrastructure, which can help revive private investments by easing supply constraints and offset the weakening of external demand due to global headwinds.
Higher investments will have to be accompanied by higher domestic savings to keep the savings-investments gap under check. The big missing link now is the government's focus on stepped-up capital expenditure on infrastructure, but not enough commensurate steps to encourage savings, the report noted.
This is because, this government, in its bid to simplify the income tax structure, has been steadily doing away with various incentives for savings, impacting household savings, which has been the mainstay of overall savings in the economy, it added.
After the 6.6 per cent contraction in FY21, the economy is expected to close the outgoing fiscal with a 7 per cent growth, down from 8.7 per cent in FY22 and fall further to 5.9 per cent next fiscal.
