1. Among several factors for India's potential growth, savings rate is the most effective one. Do you agree? What are the other factors available for growth potential? (150 words) 10M
- The growth of Indian economy is mainly driven by the domestic consumption and demand, and the reason for this is the high savings rate which results in a higher steady state capital stock and higher level of output. We can relate India's growth rate with the savings rate in the statistical terms a-well. In the phase of 2005-2010, Indian economy experienced an average growth rate of 8.5% and in the same period the saving rate was also highest
- To this savings rate the household sector's contribution is the highest followed by the private and public sector. This savings rate from the last couple of years is decreasing steadily and the impact is seen in terms of growth rate.
- Other than the savings rate some other factors also determine the growth potential of any economy like infrastructure growth, GFCF (Gross Fixed Capital Formation), ICOR (Increment Capital Output Ratio) that has to be low, inflow of capital (FDI', FII), technology upgradation, diversification of exports, favourable taxation structure, ease of doing business, availability of cheap and long term credit etc.
- If most of these demands are met then that country can follow the path of long term high GDP growth rate. The contemporary e.g. is China supports this claim.