Savings When Data Is Doubted Can Theory Help

Savings: When Data Is Doubted Can Theory Help?
Ashima Goyal Simulations with a dynamic general equilibrium model indicate that there is some underestimation of savings in the 1990s, but at the same time there has been a fall in savings propensities. There are many ways in which foreign inflows impinge on savings. If they raise the rate of growth then savings do tend to be higher in periods of rapid growth. But in order to prevent an unsustainable accumulation of debt, it is essential to maintain high incentives for savings and investment, and provide new instruments for both. In the presence of the latter, mobility between income groups augurs well for a future rise in the Indian aggregate savings ratio.