Question 1GS2GS2
How do household savings contribute to the growth of the Indian economy? Do you think that the recent fall in household savings rate marks a rise in indebtedness and distress among Indian households?
Main Body
Household savings comprises an important segment of the domestic sovereign debt, contributing nearly 40% of the debt profile. Components of household savings: Financial assets: eg. used real estate Contributions to growth: 1) Apportion to the government debt profilenearly 60% 2) Provide the financial flows towards real estate market55-60% of household debt. 3) Reduces reliance on the foreign borrowingeases pressure on capital account. Fall in household savings rate: Nearly 40% of the households are indebtedworrying sign: 1) Vulnerability to income shocks and inflation risks. 2) Rise in bank NPA's. 3) Due to reduced household savings, banks are paying the worst deposit crunch in 10 years. 4) Lesser capital creationnecessary tendencies. Thus, reforms by RBI to regulate household debt is needed, by increasing interest rates, high premiums and bank resolution mechanisms.
4Increase productive capacity of economy → stocks & bonds. 5) Responsible for healthy bank deposits rates → credit on capital assets. Fall in household savings Rate Nearly 40% of the households are indebted → worrying sign: 1) Vulnerability to income shocks and inflation risks. 2) Rise in bank NPA's. 3) Due to reduced household savings, banks are paying the worst deposit crunch in 10 years. 4) Lesser capital creation → necessary tendencies. Thus, reforms by RBI to regulate household debt is needed, by increasing interest rates, high premiums and bank resolution mechanisms.
232 words1 paragraphs
Topper
RITIKA
Subject & Paper
GS2GS2
Topic
Issues relating to Poverty and Hunger
Paradox of Poverty
Household savings and indebtedness patterns
Writing Stats
232
Total words
1
Paragraphs
analytical
Tone