Nnnnam

NAME-RATUL TARAT
ROLL NO-U21CM3778
SUBJECT-BUSINESS ENVIRONMENT
 ACKNOWLEDGEMENT

In performing my assignment, it’s a successful one I had to take the help and
guideline of some respected persons. First of all I am grateful to THE GOD who
gives me sound mind & sound health to accomplish my assignment. The
completion of the report gives me much Pleasure. But it is not my credit in this
endeavor. I would like to thank my gratitude TO Ms. AMRITA ACHARYA , for
giving me a good guideline for assignment by over phone.

I would like to thank ST ANTHONYS COLLEGE UNDER NEHU for updated

education system in MEGHALAYA. Lastly I would like to deliver my whole
hearted thanks those who were there for their cordial cooperation. Actually it
was not possible for me to complete a severe task without such help. So I pray
the long life and good health for all the persons who have helped and co-
operated me in my assignment research.
TRENDS IN INCOME AND SAVING AND INVESTMENT(2011-2021)

CONTENTS

 MEANING AND EXPLANATION OF INCOME

 ESTIMATION OF INCOME
 FIVE YEAR PLANS
 TRENDS OF INCOME:2010-2021
 NITI AAYOG
 GRAPHS AND DATA ALONG WITH BREIFING(INCOME)
 MEANING AND EXPLANATION OF SAVINGS AND INVESTMENT
 DIFFERENT TYPES OF SAVINGS AND INVESTMENT
 DIFFERENT ASPECTS OF SAVINGS AND INVESTMENT
 TRENDS OF SAVING AND INVESTMENT
 GRAPHS AND DATA ALONG WITH BREIFING(SAVING AND INVESTMNT)
 NATIONAL INCOME

 National Income refers to the money value of all the goods and services produced in a country during a financial year. In other words, the
final outcome of all the economic activities of the nation during a period of one year, valued in terms of money is called as a National
income.

 In the above definition, the economic activities include all the human activities that produce goods and services that can be valued at market price.
Such as production by farmers, production by firms in different industrial sectors, production of goods and services by government, services
produced by business intermediaries Viz. Wholesalers and retailers, banks and other financial institutions, educational institutes and professionals
like doctors, teachers, lawyers, etc.

 Also, there are non-economic activities that include the production of goods and services but do not have any market value. Such as hobbies,
services of housewives, service to self, an exchange of mutual service between neighbors, etc.

ESTIMATION OF NATIONAL INCOME

In India, the estimation of national income is being done by two methods:
 Net Product method
 Net Income method.
Net Product Method

 While estimating the gross domestic product of the country, the contribution to GDP from various sectors like agriculture, livestock, fishery,
forestry and logging, mining and quarrying is estimated with the adoption of product method.

 In this method, it is important to estimate the gross value of product, biproducts and ancillary activities and then steps are taken to deduct the value
of inputs, raw materials and services from such gross value. In respect of other sub-sectors like animal husbandry, fishery, forestry, mining and
factory establishments, the gross value of their output is obtained by multiplying the estimated output with their market price. From such gross
value of output, deductions are made for cost of materials used and depreciation charges so as to obtain net value added in each sector.

 In respect of secondary activities, the computation of gross domestic product is done by the production approach only for the manufacturing
industrial units (both registered and unregistered). In respect of constructions activity, the estimates of the value of pucca construction is made by
the commodity flow approach and that of construction is made by the expenditure method.
Net Income Method

 In India, the income from rest of the sectors, i.e., small enterprises, commerce, transport and communications, banking and insurance professions,] liberal
arts, domestic activities, house property, public authorities and rest of the world is estimated by the income method. Here, the income approach is adopted
to estimate the value added from these aforesaid remaining sectors. Here, the process involves the measurement of aggregate factor incomes in the shape
of compensation of employees (wages and salaries) and operating surpluses in the form of rent. interest, profits and dividends
.
 In order to measure the contribution of small enterprises, it is essential to make an estimation of total number of workers employed in different
occupations under small enterprises through sample surveys and also to estimate the per capita average earnings of such workers.

 After multiplying the total number of such workers employed by their average earning, the contribution of small enterprises to national product is
estimated. In order to obtain the contribution of banking and insurance sector, necessary information are collected from their balance sheets so
as to add the wages, salaries, directors' fees and dividends.

 In order to derive the contributions of transport and communication, trade and commerce, professions and liberal arts, the same procedure as adopted
by the small enterprises is followed. Regarding the contribution of the public sector, the amounts related to wages, salaries, pensions, other benefits,
dividend or surpluses etc. are all added up to derive the same.

 Ag the contribution of house property to the national income is obtained by estimating the imputed value of net rental of all houses situated both
in urban and rural areas.

 Finally, by adding up the contribution of all different sectors to national income of the country, it is necessary to obtain net domestic product at factor
cost. In order to derive the net national income at current prices, it is necessary to add the net income from abroad and net indirect taxes with the net
domestic product at factor cost.

 This same estimate is then deflated at the prices of the base year selected to derive a series of national income at constant prices.
FIRST FIVE YEARS PLAN

FIRST PLAN(1951-1956)
  During the First Plan period, the national income at constant (1980-81) prices has increased from Rs. 41,443 crore in 1951-52 to Rs.
48,288 crore in 1955-56 showing an annual average, growth rate of 3.6 per cent. Again the per capita income at 1980-81 prices has also
increased from Rs. 1,135.4 in 1951-52 to Rs. 1,228.7 in 1955-56 showing an average growth rate of only 1.7 per cent during the same
plan period.

SECOND PLAN(1956-1961)
  During the Second Plan period, the national income at constant (1980- 81) prices has increased from Rs. 50,955 in 1956-57 to Rss
58,602 crore in 1960-61 showing an annual average growth rate of 3.9 per cent during the plan period. Moreover, the per capita income
at 1980- 81 prices has also reached the level from Rs. 1,270.7 in 1956-57 to Rs. 1,285.8 in 1960-61 showing an annual average growth
rate of 1.9 per cent during the plan period.

THIRD PLAN(1961-1966):

 During the Third Plan, the net national product at constant (1980-81) prices has increased from Rs60,168 crore in 1961-62 to Rs 65,734
crore in 1965-66 showing an annual average growth rate of only 2.3 per cent during the plan period. Again, the per capita income at 1980-
81 prices has also increased insignificantly from Rs. 1,355.1 in 196162 to Rs. 1,355.3 in 1965-66 showing an annual average growth rate
of only 0.1 per cent during the plan period.
 FOURTH PLAN (1969-74):

 During the Fourth Plan, the national income at constant (1980-81) prices has increased from Rs.78,177 crore
in 1969-70 to Rs. 86,010 crore in 1973-74 which revealed the annual average growth rate of only 3.3 per cent
during the plan period.

 Again the per capita income at 1980-81 prices has also increased marginally from Rs. 1,478 in 196970 to Rs.
1,483 in 1973-74 showing an annual average growth of only 0.9 per cent during the same period.

FIFTH PLAN(1974-1979):

 During the Fifth Plan period, the net national product at constant (1980- 81) prices has increased from Rs.
87,116 crore in 1974-75 to Rs. 1 ,03,670 crore in 1977-78 showing an annual average growth rate 4.9 per cent
during the plan period. Again the per capita income at 1980-81 prices has also increased from Rs. 1 ,469 in
197475 to Rs. 1,635 in 1977-78 showing an annual average growth rate of 2.6 per cent during the plan period.
 SIXTH PLAN (1980-85):

 During the Sixth Plan period, the net national product at constant (1980- 81) prices has Increased from Rs. 1,
10,685 crore in 1980-81 to Rs. 1,33,808 crore in 1984-85 shown an annual average growth rate of 5.4 per cent
during the plan period.

 Similarly, the per capita income at 1980-81 prices has also increased from Rs. 1 ,630 in 1980-81 to Rs. 1,881
in 1984-85 showing an annual average growth of 3.2 per cent during the plan period.

SEVENTH PLAN (1985-90):

 During the Seventh Plan period, the national income of India at constant (1980-81) prices has increased from Rs. 1, 39,025
crore in 1985-86 to Rs. 1,77,315 crore in 1989-90 showing an annual average growth rate of 5.8 per cent during the plan
period. Again the per capita income at 198081 prices has also increased from Rs. 1,841 in 1985-86 to Rs. 2,157 in 1989-
90 showing an annual average growth rate of 3.6 per cent during the plan period.
EIGHT PLAN (1992-97):

 During the Eighth Plan period, the national income at constant (1980- 81) prices has increased
considerably from Rs. 1,95,602 crore in 1992-93 to Rs. 2,58,465 crore in 1996-97 showing an annual
average growth of 6.8 per cent during the plan period.
  Again the per capita income at 1980-81 prices, has also increased from Rs. 2,243 in 1992-93 to Rs. 2,761 in 1996-
97 showing an annual average growth rate of 4.9 per cent during the plan period.

NINTH PLAN (1997-2002):

 The Ninth Plan which has started from 1st April, 1997 continued till 31st March, 2002. The draft of
the Ninth Plan approved by the National Development Council (NDC) on 19th February, 1999 has
projected a GDP growth rate of 6.5 per cent during the plan period. But the achievement is estimated
at 5.5 per cent during the plan period.
  During the Ninth Plan period, the national income at constant prices (1993-94) has increased
considerably from Rs. 8,90,890 crore in 1997-98 to Rs. 11, 15, 157 crore in 2001-02, showing an
annual average growth rate of 5.5 per cent during the plan period. Again the per capita income at
199394 prices has also increased from Rs. 9,243.6 in 1997-98 to Rs. 10,753.7 in 2001-02, showing
an annual average growth rate of 3.6 per cent during the plan period.

TENTH PLAN (2002-2007):

 The Tenth Plan which started in 1 st April. 2002 continued till 31st March, 2007. The draft of the
Tenth Plan approved by NDC on 1st September, 2001 has set a tar et of achieving growth rate of 8.0
per cent in GDP during the plan period.

 During the Tenth Plan period, the national income at constant prices (1999-2000) has increased
considerably from Rs. 18,05,830 crore in 2002-03 to Rs. 25, 30,494 crore in 2006-07, showing the
annual growth rate of 3.9 per cent in the first year (2002-03) and 9.7 per cent in 2006-07.
 ELEVENTH PLAN (2007-2012):

 The Eleventh plan which started in 1st April, 2007 and continue till 31st March 2012. The draft of
the Eleventh Plan approved by NDC on 9th December, 2006 has set a target of achieving growth rate
of 9.0 per cent of GDP during the plan period.
 During the Eleventh Plan period, the national income at constant prices (2004-05) has increased from
Rs.449970 crore in 2007-08 to Rs. 3,672,192 crore in 2008-09 (Q), showing the annual growth of
rate of 6.4 per cent.

TWELFTH PLAN (2012-2017)

YEARS 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18

NATIONAL 88.41 lakh crore 100.56 lakh crore 106.57 lakh crore 113.81 lakh crore 121.65 lakh crore 129.85akh crore
INCOME

 This plan was started from 1st April 2012 continued till 31st march 2017.
 The growth rate was showcased as 8.2% National Development Council
(NDC) growth for the period.
 NATIONAL INCOME:2017-2018

 India's per capita income grew at a pace of 8.6 per cent to Rs 1 , 12,835 during the last fiscal ended
March 2018, official data Showed.

 The per capita net national income in 2016-17 stood at Rs 1,03,870, witnessing a growth of over 10.3
per cent from the preceding fiscal ended March 2016 (at Rs 94,130).

"The per capita income at current prices during 2017• 18 is estimated to have attained a level of Rs I, 12,835 as
compared to the estimates for the year 2016-17 of Rs 1,03,870, showing a rise of 8.6 per cent, showed the
provisional estimates of annual income, 2017-18 released by the Ministry of Statistics and Program and
Implementation (MOSPI).

• India's per capita income grew at a slower pace of 8.6 per cent to Rs 1,12,835 during the last fiscal ended March 2018, official
data showed today.
• The per capita net national income in 2016-17 stood at Rs 1,03,870, witnessing a growth of over 10.3 per cent from the preceding
fiscal ended March 2016 (at Rs 94,130).
• The per capita income is a crude indicator of the prosperity of a country.
• In real terms, calculated at constant prices with base 2011-12, the per capita income grew by 5.4 per cent to Rs 86,668 in 2017-18
as compared to Rs 82,229 in 2016-17.
• "The growth rate in per capita income is estimated at 5.4 per cent during 2017-18, as against 5.7 per cent in the previous year," the
release said.
• The country's gross national income (GNI) at current prices witnessed a rise of about 10 per cent at Rs 165.87 lakh crore during
2017-18 as against Rs 150.77 lakh crore during 2016-17.
• While on real terms (with 2011-12 base year), the GNI increased at a slower rate of 6.7 per cent to Rs 128.64 lakh crore in fiscal
ended March 2018, as against the previous year's estimate of Rs 120.52 lakh crore.
• For fiscal ended March 2017, the real term GNI grew by 7.1 per cent.
National Income Trend line
The following are some of the important causes of slow growth of national income in India:
1.HIGH GROWTH RATE OF POPULATION

 Rate of growth of population being an important determinant of economic growth, is also responsible for
slow growth of national income in India. Whatever increase in national income has been taking place, all
these are eaten away by the growing population. Thus high rate of growth of population in India is retarding
the growth process and is responsible for slow growth of income.

2. EXCESSIVE DEPENDENCE ON AGRICULTURE

 Indian economy is characterized by too much dependence on agriculture and thus it is primary
producing. The major share of national income that is usually coming from the agriculture, which is
contributing nearly 34 per cent of the total national income and engaged about 66 per cent the total
working population .

 Such excessive dependence on agriculture prevents quick rise in the level of national income as well
as per capita income as the agriculture is not organized on commercial basis rather it is accepted as
way of life.


Excessive dependence on agriculture and low land-man ratio, inferior soils, poor ratio of capital
equipment, problems of land holding and tenures, tenancy rights etc. are also responsible for slow
growth of agricultural productivity which, in turn, is also responsible for slow growth of national
income.
3.OCCUPATIONAL STRUCTURE

 The peculiar occupational structure is also responsible for slow growth of national income in the country. At present
about 66 per cent of the working force are engaged in agriculture and allied activities, 3 per cent in industry and mining
and the remaining 31 per cent in the tertiary sector.

 Moreover, prevalence of high degree of under-employment among the agricultural laborers and also among the work
force engaged in other sectors is also responsible for this slow growth of national income.
4. LOW LEVEL OF TECHNOLOGY AND ADOPTION
 In India low level of technology is also mostly responsible for its slow growth of national income .Moreover, whatever
technology that has been developed in the country, is not properly utilized in its production process to slow growth of
national income in the country.
5. POOR INDUSTRIAL DEVELOPMENT:

 Another important reason behind the growth of national income in India is the POT rate of development of its industrial
sector. The industrial sector in India has failed to maintain a consistent and sustainable growth rate during the planned
development period and more particularly in recent years.
 Moreover, the development of basic industry is also lacking in the country. All these resulted a poor growth in the
national income of the country.

6. POOR DEVELOPMENT OF INFRASTRUCTURAL FACILITIES:

 In India, the infrastructural facilities viz., transport, communication, power, irrigation etc. have not y« been developed
satisfactorily as per its requirement throughout the country This has been creating major hurdle in the path of
development o industrial sector which is also resulting in low national income.

7.POOR RATE OF SAVING AND INVESTMENT:

 The rate of savings and investment in India is also quite poor as compared to that of developed countries of the world.
In recent times, i.e., in 2008-09 , the rate of gross domestic savings was restricted to 32.5 cent of GDP and that of
investment was 33.0 per cent of GDP in the same year. Such low rate of saving and investment has resulted in a poor
growth of national income in the country.

8. SOCIO POLITICAL CONDITIONS:

 Socio- political conditions prevailing in the country is also not very much conducive towards rapid development.
Peculiar social things like caste system, joint family system, fatalism, illiteracy, unstable political scenario etc. are
causing unemployment which ultimately leads to low income.

 However various steps and measures are taken by Central and State Government to improve the condition of income in
the country through Structural and Consistent implementation of proper plans.
GNI (formerly GNP) is the sum of value added by all resident producers plus any product taxes (less subsidies) not included in the
valuation of output plus net receipts of primary income (compensation of employees and property income) from abroad. Data are
in current U.S. dollars. GNI, calculated in national currency, is usually converted to U.S. dollars at official exchange rates for
comparisons across economies, although an alternative rate is used when the official exchange rate is judged to diverge by an
exceptionally large margin from the rate actually applied in international transactions. To smooth fluctuations in prices and
exchange rates, a special Atlas method of conversion is used by the World Bank. This applies a conversion factor that averages the
exchange rate for a given year and the two preceding years, adjusted for differences in rates of inflation between the country, and
through 2000, the G-5 countries (France, Germany, Japan, the United Kingdom, and the United States). From 2001, these
countries include the Euro area, Japan, the United Kingdom, and the United States.

 India gnp for 2020 was $2,625.44B, a 9.28% decline from 2019.
 India gnp for 2019 was $2,894.03B, a 6.63% increase from 2018.
 India gnp for 2018 was $2,714.03B, a 11.25% increase from 2017.
2011-2012
Data from central government showed a downward revision in GDP (gross domestic product) growth to 6.2 per cent for
fiscal year 2011-12 from the earlier provisional estimate of 6.5 per cent.

 Alongside, however, the GDP growth for 2010-11 fiscal stands revised upwards to 9.3 per cent from 8.4 per
cent, as per the first revised estimates of ‘National income, consumption expenditure, saving and capital
formation’, released here by the Central Statistics Office (CSO) for 2011-12 along with second revised
estimates for 2010-11 and the third revised estimates for 2009-10.
 “GDP at factor cost at constant (2004-05) prices in 2011-12 is estimated at Rs.52.43 lakh crore as against
Rs.49.37 lakh crore in 2010-11, registering a growth of 6.2 per cent during the year as against a growth of
9.3 per cent in the year 2010-11,” a CSO statement said.
 As per the statement, the GDP in 2011-12 at current prices is estimated at Rs.83.53 lakh crore as against
Rs.72.67 lakh crore in 2010-11, marking an increase of 15 per cent as against an increase of 19 per cent in
the previous fiscal year.
 The per capita income in real terms (at 2004-05 prices), the CSO said, is estimated at Rs.38,037 for 2011-12
as against Rs.36,342 in 2010-11, which works out to an increase of 4.7 per cent during the fiscal as against
an increase of 7.2 per cent in the previous year.
 However, the per capita income at current prices is estimated at Rs.61,564 in 2011-12 as against Rs.54,151
in the previous fiscal to mark a lower growth of 13.7 per cent as compared to an increase of 17.1 per cent
posted in 2010-11.
Standard of living
 As a measure to assess the standard of living, the per capita income on a monthly basis works out to
Rs.5,130 during the fiscal as compared to Rs.4,513 in 2010-11.
 According to the CSO data, the expansion in GDP during 2011-12 was mainly on account of growth in
sectors such as financing, insurance, real estate and business services by11.7 per cent, transport, storage and
communication (8.4 per cent), electricity, gas and water supply (6.5 per cent) and trade, hotels and
restaurants (6.2 per cent).
 As for gross domestic savings (GDS), the growth in 2011-12 at current prices fell to 30.8 per cent of the
GDP at market prices and is estimated at Rs.27.65 lakh crore during the year as compared to an increase of
34 per cent to Rs.26.52 lakh crore in 2010-11
Deceleration
 The deceleration in GDS growth in 2011-12, the statement said, was mainly owing to declines in household
financial savings from 10.4 per cent to 8 per cent, in private corporate sector savings from 7.9 per cent to
7.2 per cent and in public sector savings from 2.6 per cent to 1.3 per cent as compared to a year ago.
 Among other major indicators, the gross national income at constant (2004-05) prices and at factor cost in
2011-12 is estimated at Rs.51.97 lakh crore as compared to Rs.48.82 lakh crore in 2010-11, which works
out to an increase of 6.4 per cent during the year and marks a decline from the previous year’s growth figure
of 8.8 per cent. On the other hand, the GNI at current prices in 2011-12 is estimated at Rs.82.77 lakh crore
 as compared to Rs.71.85 lakh crore in 2010-11, an increase of 15.2 per cent which is lower than the 18.4 per
cent growth achieved in the previous year.
Household sector
 Household sector savings in absolute terms, the data showed, increased from Rs.18.33 lakh crore in 2010-11
to Rs.20.04 lakh crore in 2011-12 to pose an increase of 9.3 per cent while private corporate sector savings
rose by 4.1 per cent from Rs.6.19 lakh crore in 2010-11 to Rs.6.44 lakh crore in 2011-12.
 Savings of the public sector, however, fell by a hefty 41.4 per cent from Rs.1.99 lakh crore in 2010-11 to
Rs.1.17 lakh crore in 2011-12.
 As per the data, gross domestic capital formation increased from Rs.28.72 lakh crore in 2010-11 to Rs.31.41
lakh crore in 2011-12 at current prices.
 At constant prices (2004-05), it increased from Rs.21.20 lakh crore in 2010-11 to Rs.21.32 lakh crore in
2011-12.
 Accordingly, the rate of growth of gross capital formation at current prices stood at 35 per cent in 2011-12
as against 36.8 per cent in 2010-11 and at 37.9 per cent and 40.0 per cent during the two years at constant
prices.

2012-2013
 expanded by 4.5 per cent in 2012-13, compared with the earlier estimate of 5 per cent, on account of subdued
performance in agriculture, mining and manufacturing.
 However, gross domestic product (GDP) growth in 2011-12 has been revised upwards to 6.7 per cent from 6.2
per cent, according to the estimates of national income, consumption expenditure, saving and capital formation.
 “Gross domestic product at factor cost at constant (2004-05) prices in 2012-13 is estimated at Rs.54.80 lakh
crore as against Rs.52.50 lakh crore in 2011-12, registering a growth of 4.5 per cent during the year as against a
growth of 6.7 per cent in the year 2011-12,” a press statement said.
 Growth in 2012-13 is the lowest in a decade, with the previous low of 4 per cent recorded in 2002-03.
 The estimates for 2012-13 were released by the Central Statistics Office (CSO) under the Ministry of Statistics
and Programme Implementation, along with the second revised estimates for 2011-12 and third revised
estimates for 2010-11.
 Growth for 2010-11 was revised downwards to 8.9 per cent from 9.3 per cent earlier in the third and final
revision.
Primary sector

According to the revised estimates for 2012-13, the primary sector, which includes agriculture, fishing, mining
and quarrying, grew by one per cent against the earlier estimate of 1.6 per cent.
 Growth in the secondary sector, including manufacturing, electricity, gas, water supply and construction, was
1.2 per cent, down from the original estimate of 2.3 per cent.
 The 4.5 per cent growth rate in 2012-13 is on account of expansion in financing, insurance, real estate as well as
business services (10.9 per cent), transport, storage and communication (6 per cent) and community, social and
personal services (5.3 per cent).
 At current prices, the gross national income in 2012-13 is estimated at Rs.92.70 lakh crore as compared to
Rs.83.10 lakh crore in 2011-12, showing a rise of 11.5 per cent during the year, as against an increase of 16.0
per cent in the previous year,” CSO said in the press release.
Per capita income

According to the statement, per capita income (per capita net national income at factor cost) in real terms is
 estimated to have risen by 2.1 per cent to Rs.38,856 in 2012-13 from Rs.38,048 in 2011-12. That compared with
an increase of 5.1 per cent during the previous year.
 Per capita income at current prices is estimated at Rs.67,839 in 2012-13 as against Rs.61,855 in the previous
year, a growth of 9.7 per cent as against an increase of 14.5 per cent during the previous year.
 Gross fixed capital formation, which is an indicator of investment, amounted to Rs.30.70 lakh crore at current
prices in 2012-13 as against Rs.28.60 lakh crore in 2011-12, a rise of 7.4 per cent.
 At current prices, gross fixed capital formation of the public sector increased by 23.5 per cent to Rs.7.90 lakh
crore in 2012-13 from Rs.6.40 lakh crore in 2011-12 and that of the private corporate sector by 0.8 per cent to
Rs.8.60 lakh crore in 2012-13 from Rs.8.50 lakh crore in 2011-12.
 In the household sector, it went up by 3.9 per cent to Rs.14.30 lakh crore in 2012-13 from Rs.13.70 lakh crore in
2011-12.

2013-2014
 Smart farm sector growth spurred India’s economy to grow 4.7 per cent in 2013-14, according to the gross
domestic product (GDP) provisional estimates released on Friday. The GDP growth rate in the previous year
was a decade-low of 4.5 per cent. This is the second year in a row during which the economy’s growth remained
below the 5 percent.
 The last time the economic growth rate had pierced the 5-per cent mark was in 1984-85 to 1987-88.
 Good harvests in both the seasons lifted farm sector growth to 4.7 per cent for the year. It had grown 1.4 per
cent in the previous fiscal. In the three-month period January-March, the farm sector grew 6.3 per cent against
1.6 per cent growth in the same period of 2012-13.
  The data released by the Central Statistics Office (CSO) confirms that both the manufacturing and mining
sectors shrunk in 2013-14 with fall in output. Lacklustre infrastructure activity dampened construction growth as
well. The manufacturing sector contracted (-) 0.7 per cent in 2013-14 against 1.1 per cent in 2012-13. Mining
and quarrying declined (-) 1.4 per cent against (-) 2.2 per cent in 2012-13.

2015
 India’s GDP crossed the $2-trillion mark in 2014, according to data released by the World Bank in Washington.
After taking 60 years to reach the $1-trillion mark, India added the next trillion in just seven years.

 The World Bank data also show that India’s gross national income per person rose to $1,610 (around Rs. 1 lakh)
a year during 2014 from $1,560 the previous year. An analysis by The Hindu found that it would take India a
little more than a decade to rise from its current ‘lower middle income’ category to the ‘upper middle income’
level.
 India’s growth rate, at 7.4 per cent in 2014, makes it the fastest growing major economy along with China’s,
which is a whopping $10.4 trillion in size. The Indian economy, at $2.06 trillion, has almost doubled in size
since the financial crisis hit the country in 2008, and has more than quadrupled from the start of this millennium.
 Despite its increase in per capita gross national income (GNI), India has remained in the ‘lower middle income’
category ($1,046-$4,125). Using the World Bank’s data, The Hindu extrapolated from India’s average annual
growth rate in per capita GNI over the last decade — of 8.9 per cent — and found that it would become an
‘upper middle income’ country ($4,126-$12,735) in 2026, a little more than a decade from now. This will put it
in the category China occupies now.

2016-2017
 The Indian economy slowed down in 2016-17, with the gross domestic product declining drastically from 8 per
cent in 2015-16 to 7.1 per cent the next year, government said.
 Union Finance Minister Arun Jaitley said the slower economic growth reflected lower growth in the industry
and the services sectors, due to a number of factors including structural, external, fiscal and monetary factors.
 He said in the Lok Sabha that the lower rate of global economic growth in 2016, along with a reduction in gross
fixed investment to GDP ratio, stressed balance sheets of the corporate sector, lower credit growth in industry
sector were some of the reasons for the low growth rate in 2016-17.
 “Slower growth in 2016-17 reflects lower growth in industry and services sector. Economic growth of a country
depends on a number of factors including structural, external, fiscal and monetary factors,” he said during
Question Hour.
 As per the latest estimates from Central Statistics Office, the growth rate of Gross Domestic Product (GDP) at
constant prices was 7.5 per cent, 8.0 per cent and 7.1 per cent respectively in 2014-15, 2015-16 and 2016-17.
 The growth in GDP at constant market prices was 5.7 per cent and 6.3 per cent in Quarter 1 (Q1) and Quarter 2
(Q2) of 2017-18 respectively.
 Mr. Jaitley claimed that despite the slowdown, as per the IMF, India was the fastest growing major economy in
2016 and second fastest growing major economy in 2017 in the world.
 He said the government has taken various initiatives to boost the growth of the economy, including a giving a
fillip to manufacturing, concrete measures for transport and power sectors as well as other urban and rural
infrastructure, comprehensive reforms in the foreign direct investment policy and special package for textile
industry.
 The minister said the government had also announced various measures in the 2017-18 budget to promote
growth in which included a push to infrastructure development by giving infrastructure status to affordable
housing, higher allocation to highway construction and focus on coastal connectivity.
 “For highways development, the Bharatmala Pariyojana has been launched. The government has launched a
phased programme for bank recapitalisation. This entails infusion of capital to the public sector banks, that is
expected to encourage banks to enhance lending,” he said.
  Mr. Jaitley said the Insolvency and Bankruptcy Code was enacted to achieve insolvency resolution in a time
bound manner.
 He said the other growth promotion measures included lower income tax for companies with annual turnover up
to Rs 50 crore, further measures to improve the ease of doing business, and a major push to the digital economy.
 Mr. Jaitley said as per information available from Reserve Bank of India, the gross bank credit (outstanding) for
agriculture and allied sectors was ₹ 9,923.87 billion as of 2016-17 as against ₹ 8,829.42 billion as on 2015-16.
 “The introduction of the Goods and Services Tax (GST) has provided a significant opportunity to improve
growth momentum by reducing barriers to trade, business and related economic activities,” he added.

2017-2018
 India’s gross domestic product (GDP) grew at 8.2% in 2016-17, 110 basis points more than the earlier figure
of 7.1%, according to the second revised estimates released by the Central Statistical Office (CSO).

 One basis point is one hundredth of a percentage point.

The CSO also issued first revised estimates for the year 2017-18, revising GDP growth to 7.2% instead of the earlier
6.7% figure.

 These figures are significant as 2016-17 and 2017-18 were not normal years in terms of economic activity. The
Narendra Modi government implemented demonetisation, which led to an abrupt withdrawal of 86% of the
currency in circulation, on November 8, 2016. The government implemented goods and services tax (GST) in
July, 2017. Both these moves led to a large disruption in economic activity, especially in agriculture and other
unorganized sectors.

 The revised figures suggest that the headwinds to growth due to these policies were lower than what was
captured in earlier GDP estimates. Growth in the gross value added (GVA) component of agriculture and
allied activities in 2017-18 has been revised from 3.4% to 5% in the first revised estimates.
 2018-2019
 India’s gross domestic product (GDP) grew 6.1% in the year, down from 6.8% estimated earlier, mainly due to deceleration
in mining, manufacturing and farm sectors.

 Other things being equal, the lower base for FY19 will push growth for the current fiscal to 5.7% from 5% estimated in the
numbers released last month, slowest pace of growth in 11 years.

In the second revised estimate for this year, GDP growth for 2017-18 stood 7% against earlier estimate of 7.2%. For FY17, there
was a marginal increase in GDP growth from 8.2% to 8.3%, data released by the national statistics office showed.

“The higher growth of 5.7% is based on the revisions made today,” said Soumya Kanti Ghosh, group chief economic advisor at
State Bank of India.
 The statistics office cited use of updated estimates of production and prices of some crops, livestock products, fish and
forestry products, and provisional results of Annual Survey of Industries 2017-18 in place of inflation and production data
as reasons for the 2017-18 revision.

 Replacement of ‘Revised Estimates’ of different items of expenditure and receipts in the Central & State government
budgets by ‘Actuals’ along with use of updated information on local bodies & autonom ..

2019-2020

 India’s gross domestic product (GDP) growth rate slowed to a six-year low of 5% in the first quarter of the
2019-20 financial year, the government announced on Friday, led by a dramatic slowdown in the manufacturing
sector.
 The last time the GDP grew slower was in the fourth quarter (January to March) of the financial year 2012-13,
according to data with the Ministry of Statistics.
 It grew at 8% in the first quarter of last year. The growth of Gross Value Added (GVA) stood at 4.9% in the first
quarter of the financial year 2019-20, also the slowest in six years.
 “The quarterly GDP estimates show that India’s GDP growth, while high, has shown some slowdown,” Chief
Economic Adviser Krishnamurthy Subramanian told reporters. “This is due to both endogenous and exogenous
factors. The impact comes, especially, from global headwinds due to the deceleration in developed economies,
the Sino-American trade conflict, etc.”
 The data show that the manufacturing sector grew at an anaemic two-year low of 0.6% in the first quarter of 2019-
20, down from 12.1% in the same quarter of the previous year. The agriculture sector also saw a dramatic
slowdown in growth to 2% from 5.1% over the same period.

 The data show that the manufacturing sector grew at an anaemic two-year low of 0.6% in the first quarter of 2019-
20, down from 12.1% in the same quarter of the previous year. The agriculture sector also saw a dramatic
slowdown in growth to 2% from 5.1% over the same period.

 Mr. Subramanian, however, highlighted the robust growth in the electricity and power generation sector, of
8.6% in the quarter under consideration compared with 6.7% in the same quarter of the previous year.
 “Electricity and power generation, which is a leading indicator across the world, grew by 8.6%, a good sign of
green shoots towards higher growth,” he said.
 “While general elections in April-May 2019 had some impact on investment growth, the collapse of private
consumption demand from 10.6% in the fourth quarter of financial year 2017-18 to 3.1% in the first quarter of
financial year 2019-20 is a real cause of concern,” Mr Pant added.
 The government has, over the last week, announced a whole host of measures to help revive the economy,
aimed at easing tax rules for foreign portfolio investors, start-ups, increasing credit outflows by the banks and
NBFCs, increasing demand for the auto sector, and liberalising the foreign direct investment rules for single-
brand retail.
  Finance Minister Nirmala Sitharaman also announced a slew of banking reform measures, including merging 10
banks into four entities.
 “As the Economic Survey 2019 shows, investment is a critical driver of the economy with consumption being a
key force multiplier,” Mr. Subramanian said. “Together with steps taken by the government for the banks and
the financial sector, and structural reforms, investment should continue improving and drive economy to higher
growth.”

2020-2021
 India's Gross Domestic Product (GDP) contracted 7.3% in 2020-21, as per provisional National
Income estimates released by the National Statistical Office on Monday, marginally better than the
8% contraction in the economy projected earlier. GDP growth in 2019-20, prior to the COVID-19
pandemic, was 4%.
 The fourth quarter of 2020-21 recorded a growth of 1.6% in GDP, the second quarter of positive
growth, after the country had entered a technical recession in the first half of the year. The Gross
Value Added recorded 3.7% growth in Q4, compared to 1% in Q3. GVA had contracted 22.4% and
7.3% in the first and second quarters of 2020-21.

 The GVA in India's economy shrank 6.2% in 2020-21, compared to a 4.1% rise in the previous year.
Only two sectors bucked the trend of negative GVA growth - Agriculture, Forestry and Fishing
(which rose 3.6%) and Electricity, Gas, Water Supply and other Utility Services (up 1.9%).

 GVA from Trade, Hotels, Transport, Communication and Broadcasting-related services recorded the
sharpest decline of 18.2%, followed by Construction (-8.6%), Mining and quarrying (-8.5%) and
Manufacturing (-7.2%).
 GDP had contracted 24.4% in the April to June 2020 quarter, followed by a 7.4% shrinkage in the
second quarter. It had returned to positive territory in the September to December quarter with a
marginal 0.5% growth.
 The National Statistical Office attributed the improvement over its earlier growth estimates, to the
improved performance of indicators, used in compilation of GVA, in the fourth quarter of 2020-21,
owing to calibrated and steady opening of the economy.
 "In addition to this, revised data received from some source agencies for the previous quarters and
receipt of GST data for third quarter along with fourth quarter have also contributed to the revision in
the estimates," the NSO said.
 The NSO also warned that data collection had been impacted as much as any other activity by the
pandemic, so its estimates could undergo sharp revisions.
 Early results on the performance of Corporate Sector for April-December 2020, which
 were used in the second Advance Estimates (that projected an 8% contraction in GDP), have been
revised using the latest available information, it said.
 “Considering the current Covid situation, the statutory timelines for filing the requisite financial
returns of fourth quarter have been extended by the Government. Consequently, the private corporate
sector estimates of industries are based on other indicators like IIP, GST, etc. This may have
implications on subsequent revision of these estimates,” it said.
SAVINGS AND INVESTMENT

 Savings refers to the money that a person has left over after they subtract out their consumer spending from
their disposable income over a given time period. Savings, therefore, represents a net surplus of funds for an individual
or household after all expenses and obligations have been paid.
 Savings are kept in the form of cash or cash equivalents (e.g. as bank deposits), which are exposed to no risk of loss
but also come with correspondingly minimal returns. Savings can be grown through investing, which requires that the
money be put at risk, however.
 Savings is the amount of money left over after spending and other obligations are deducted from earnings.
 Savings represent money that is otherwise idle and not being put at risk with investments or spent on consumption.
 Savings accounts are very safe but tend to offer very low rates of return as a result.
 Saving can be contrasted with investing, in that the latter involves seeking to grow wealth by putting money at risk.
 Negative savings is indicative of household debt or negative net worth.
 Saving is the function of Income ,it is the excess of Income over Consumption
Types of Savings Accounts
There are different types of savings accounts offered by banks that come with different features or limitations. Note
that all bank savings vehicles come with federal deposit insurance (FDIC) of up to $250,000 per depositor per
institution.

Savings Accounts

 A savings account pays interest on cash not needed for daily expenses but available for an emergency. Deposits
and withdrawals are made online, by phone, mail, or at a physical bank branch or ATM. Interest rates on
savings accounts tend to be low but are often higher than on checking accounts. The best savings accounts can
usually be found online because they'll pay a higher interest rate. Online-only accounts may be examples
of high-yield savings accounts, which can offer as much as 20-25x higher interest on deposits than the national
average.
Checking Accounts

 A checking account offers the ability to write checks or use debit cards that draw from your account. A
checking account pays lower interest rates than other bank accounts, and many of them credit no interest at all
to checking customers. In return, however, account holders get highly liquid and accessible funds often with
low or no monthly fees.

Money Market Accounts

 A money market account (MMA) is an interest-bearing account at a bank or credit union (not to be confused
with a money market mutual fund). MMAs often pay a higher interest rate than regular passbook savings
accounts and also include check writing and debit card privileges. These also can come with restrictions that
make them less flexible than a regular checking account.

Certificates of Deposit (CDs)

 A certificate of deposit (CD) limits access to cash for a certain period in exchange for a higher interest rate.
Deposit terms range from three months to five years; the longer the term, the higher the interest rate. CDs have
early withdrawal penalties that can erase interest earned, so it is best to keep the money in the CD for the entire
term. Shopping around for the best CD rate is critical if you want to maximize your investment.
 INVESTMENT

 An investment is an asset or item acquired with the goal of generating income or appreciation. Appreciation refers
to an increase in the value of an asset over time. When an individual purchases a good as an investment, the intent
is not to consume the good but rather to use it in the future to create wealth.

 An investment always concerns the outlay of some capital today—time, effort, money, or an asset—in hopes of a
greater payoff in the future than what was originally put in.

 For example, an investor may purchase a monetary asset now with the idea that the asset will provide income in the
future or will later be sold at a higher price for a profit
 An investment involves putting capital to use today in order to increase its value over time.
  An investment requires putting capital to work, in the form of time, money, effort, etc., in hopes of a greater payoff
in the future than what was originally put in.
 An investment can refer to any medium or mechanism used for generating future income, including bonds,
stocks, real estate property, or a business, among other examples.

 The act of investing has the goal of generating income and increasing value over time. An investment can refer to
any mechanism used for generating future income. This includes the purchase of bonds, stocks, or real
estate property, among other examples. Additionally, purchasing a property that can be used to produce goods can
be considered an investmen.In general, any action that is taken in the hopes of raising future revenue can also be
considered an investment. For example, when choosing to pursue additional education, the goal is often to increase
knowledge and improve skills (in the hopes of ultimately producing more income).

 Because investing is oriented toward the potential for future growth or income, there is always a certain level of risk
associated with an investment. An investment may not generate any income, or may actually lose value over time.
For example, it's also a possibility that you will invest in a company that ends up going bankrupt or a project that
fails to materialize. This is the primary way that saving can be differentiated from investing: saving is accumulating
money for future use and entails no risk, whereas investment is the act of leveraging money for a potential future
gain and it entails some risk.

Types of Investments
Economic Investments

 Within a country or a nation, economic growth is related to investments. When companies and other entities engage in
sound business investment practices, it typically results in economic growth.
 For example, if an entity is engaged in the production of goods, it may manufacture or acquire a new piece of
equipment that allows it to produce more goods in a shorter period of time. This would raise the total output of goods
for the business. Taken in combination with the activities of many other entities, this increase in production could cause
the nation’s gross domestic product (GDP) to rise.

Investment Vehicles

An investment bank provides a variety of services to individuals and businesses, including many services that are
designed to assist individuals and businesses in the process of increasing their wealth.

 Investment banking may also refer to a specific division of banking related to the creation of capital for other
companies, governments, and other entities. Investment banks underwrite new debt and equity securities for all types
of corporations, aid in the sale of securities, and help to facilitate mergers and acquisitions, reorganizations, and broker
trades for both institutions and private investors. Investment banks may also provide guidance to companies who are
considering issuing shares publicly for the first time, such as with an initial public offering (IPO).

ASPECTS OF SAVINGS AND INVESTMENT

There are two aspects of saving and investments:
(i) Ex-Ante Saving and Ex-Ante Investment

(ii) Ex-Post Saving and Ex-Post Investment

Ex-Ante Saving and Ex-Ante Investment:

Ex-ante saving refers to amount of saving which households (or savers) plans to save at different levels of income in the
economy. The amount of ex-ante or planned saving is given by the saving function (or propensity to save).

Ex-ante investment refers to amount of investment which firms plans to invest at different levels of income in the
economy. The amount of ex-ante or planned investment is determined by the relation between investment demand and rate
of interest, i.e. by investment demand function.

Ex-ante can also be termed as:

(i) Intended;

(ii) Planned;

(iii) Voluntary; and

(iv) Desired.

Equilibrium occurs when Ex-ante saving = Ex-ante investment:

In an economy, equilibrium is determined when planned saving is equal to planned investment. However, both these
concepts are equal only at equilibrium level of income.

ii. Ex-Post Saving and Ex-Post Investment:

Ex-post saving refer to the actual or realised saving in an economy during a year. Ex-post or actual saving is the sum total
of planned saving and unplanned saving. Ex-post investment refers to the realised or actual investment in an economy
during a year. Ex-post or actual investment is the sum total of planned investment and unplanned investment. It must be
noted that ex-post saving and ex-post investment are equal at all levels of income. This equality between the two is brought
by fluctuations in income.

SAVINGS VS INVESTMENT
 TRENDS
Saving rate has steadily increased over time, from an extremely low base of 9.0 percent in 1950-51 to 37.7 percent in 2007-08 (Chart 1). A
significant positive and robust relationship between growth rate and saving rate was observed during this period, as growth rate was also
rising during this period. At the same time, investment rate has steadily increased, from a low base of 10.7 percent in 1950-51 to an all time
high of 39.1 percent in 2007-08. Given that India had a closed capital account before 1991 which restricted capital mobility through
administrative controls and outright prohibition, domestic saving and domestic investment in India were highly correlated (correlation
coefficient is 0.99 percent for the entire period). It may be observed that the divergence between saving and investment is persistent until
the liberalization and was narrowed down after the 1991 balance of payments crisis and further narrowed down after the economy shifted to
a flexible exchange rate regime in 1993. The correlation between saving and investment in the post reform period is more or less unchanged
from the pre-reform period (correlation in the prereform period is 0.9973 and in post reform period is 0.9972), however the gap between
them has narrowed.
As is evident from Chart 1, economic growth was largely led by investment demand, which is captured by the gross domestic fixed capital
formation in national accounts. Though growing foreign investment, both direct and portfolio investment play a role, the rise in investment
was largely financed domestically. From a low of 21.6 per cent in 1991-92, India’s domestic saving rate jumped to a record high of 37.7 per
cent in 2007-08. This fuelled investment, raising the demand for all types of investment related goods. This, in turn, had a multiplier effect
on economic growth.

Composition

Domestic saving (Investment) of India is divided into two parts - Public Saving (Investment) and Private Saving (Investment). Private Saving
(Investment) is further divided into two parts, those are Household Saving (Investment) and Corporate Saving (Investment).

While India’s saving and investment rates have steadily increased over time, their composition has undergone a considerable change (Chart
2). The most noticeable trend is the growing divergence between the public and private saving. Public saving declined from its peak level
of 4.9 per cent of GDP in 1976-77 to – 2.2 per cent in 2001-02, from where it increased to 4.5 per cent in 2007-08. During the same period,
saving rates of both the household and private corporate sectors have steadily increased, offsetting the decline in the public sector. The share
of household saving in the total saving has increased from nearly 60 per cent in the early 1990s to a maximum of 94 per cent in 2001-02,after
which it steadily declined to nearly 65 per cent in 2007-08. The private corporate sector, whose saving rate was stagnant till the late 1980s,
has recently emerged as the sector with the fastest rising saving rate (1.8 per cent of GDP in 1987-88 to 8.8 per cent of GDP in 2007-08).
The share of private corporate saving in total saving has increased from below 10 per cent in 1980s to more than 23 per cent in recent years.

Similar compositional changes have occurred in investment as well. Until late 1980s public investment rate was dominating and reached its
peak of 12 per cent in 1986-87. Following the liberalisation in early 1990s, the role of public sector has gradually reduced in number of
sectors, and its place has been taken over by the private sector. Hence, the private corporate investment has steadily increased offsetting the
decline in the public sector investment. The share of public sector investment in total investment was stagnant at around 50 per cent till
1980s, and has declined to 23 per cent in 2007-08. On the other hand, the share of private corporate investment, which was little more than
20 per cent in 1980s, has steadily increased to 40 per cent in 2007-08. Household sector investment rate also increased from low base of 3.2
per cent in 1963-64 to 14.2 per cent in 2004-05 and it moderated thereafter. However, its share in total investment broadly remained the
same.
Data

To understand the saving, investment led growth or growth driven saving and investment in India, we adopt Johansen methodology as given
in Annex. The study uses the annual data to examine the causal relationships between domestic saving, investment and income for India.
Annual time series data for gross domestic product (GDP), gross domestic saving (GDS), gross domestic investment (GDI), saving and
investment of household sector, private corporate sector and public sector for the period 1950-51 to 2007-08 are collected from the National
Accounts Statistics, published by the Ministry of Statistics and Programme Implementation, Government of India. All data are in terms of
domestic currency and nominal prices.

Unit Root Test

One of the most important attributes of a time series variable is its order of integration. Hence, we first perform unit root tests in levels and
first differences in order to determine the order of integration of the series. To test the order of integration, we employ the conventional
augmented Dickey-Fuller (ADF) test (Dickey and Fuller, 1979 and 1981). ADF test examines the null hypothesis of a unit root against a
stationary alternative. The results are presented in Table 1.

Table 1: Unit Root Test using Augmented Dickey Fuller Test

At levelµ At levell At first differenceµ
Variable Optimum ADF test Optimum ADF test Optimum ADF test Conclusion
Laglength statistic Laglength statistic Laglength statistic
Gross Domestic Product
0 3.47 1 -3.46 0 -5.34* I(1)
(GDP)
Gross Domestic Saving
0 2.14 0 -2.86 0 -6.45* I(1)
(GDS)
Household Saving
0 1.29 0 -3.22 0 -7.96* I(1)
(HHS)
Private Corporate
0 1.36 0 -1.97 0 -8.31* I(1)
Saving (PCS)
Public Sector Saving
2 0.68 0 -3.81** - - I(0)
(PBS)
Private Sector Saving
0 1.83 0 -2.87 0 -7.10* I(1)
(PS)
Gross Domestic
0 1.29 0 -2.64 0 -7.84* I(1)
Investment (GDI)
Household Investment
1 1.22 0 -3.41 0 -9.09* I(1)
(HHI)
Private Corporate
8 0.65 0 -3.38 7 -4.01* I(1)
Investment (PCI)
Public Sector
0 -0.21 0 -2.53 0 -7.42* I(1)
Investment (PBI)
Private Sector
2 2.13 0 -3.22 0 -7.41* I(1)
Investment (PI)
Note: * and ** indicate statistical significance at 1% and 5% levels, respectively. The subscripts µ and
l indicate the models that allow for a drift term and a deterministic trend, respectively.

It is evident from the table that the calculated ADF statistics for level variables are less than the critical values in all cases, suggesting that
the variables are not level stationary. Table 1 also shows that the ADF statistics for all the variables imply first-difference stationary, except
for public sector saving (PBS). For further analysis, series whose order of integration is same as that of the GDP series are only retained for
empirical analysis. Therefore, the series PBS has not been considered for further analysis.
Co-integration Test

Having established that all variables, except PBS, are integrated of same order, we proceed to test for presence of co-integration among the
variables. We employ Johansen co-integration test. It may be noted here that we are interested to check for the presence of co-integrating
relationship among the variables, however, number of co-integrating vectors is not of our interest. Accordingly, in Table 2, we present only
the results of the null hypothesis that there does not exist co-integration against the alternative that there exists cointegration.

Starting with the null hypothesis that co-integration (r=0) does not exist among the variables, the trace statistic is well above the 95 per cent
critical value for all the series except private corporate sector saving (PCS). Hence, it rejects the null hypothesis of no co-integration in favor
of existence of cointegration for all the series except PCS. Turning to the maximum eigen value test, the null hypothesis that there does not
exist co-integration is rejected at 5 per cent level of significance in favor of the specific alternative that there is at least one co-integrating
vector for all series except PCS. Thus, both the trace and maximum eigen value test statistics suggest that there exist co-integration
relationship among all series with GDP except PCS. Hence, we use Vector Error Correction (VEC) Model for all other series and Vector
Auto Regression (VAR) Model for PCS to test for causality.

Table 2: Empirical Results of the Co-integration Test based on Johansen-Juselius method

H0 : There does not exist co-integration
Variables in the system Trace statistic Maximum Eigen value statistic Conclusion
GDP and GDS 24.33 * 18.03* Co-integrated
GDP and GDI 34.06 * 29.55* Co-integrated
GDP, GDS and GDI 43.46* 30.74 * Co-integrated
GDP and PS 29.94* 22.48 * Co-integrated
GDP and PI 27.19* 21.54* Co-integrated
GDP, PS and PI 50.01 * 24.33* Co-integrated
GDP and HHS 23.95* 17.08* Co-integrated
GDP and HHI 19.75* 16.36* Co-integrated
GDP, HHS and HHI 39.33* 21.71* Co-integrated
Not co-
GDP and PCS 15.22 10.47
integrated
GDP and PCI 39.59* 34.93* Co-integrated
GDP, PCS and PCI 53.79* 41.73* Co-integrated
GDP and PBI 32.69* 32.63 * Co-integrated
Note: * indicate statistical significance at 5% levels. The critical values of Trace test
and Maximum Eigen value test at the 5% significance levels are 15.4947 and
14.2646, respectively.
Since GDP is co-integrated with GDS and GDI individually as well as collectively for the Indian economy, one can infer that there is a long-
run equilibrium relationship between the two series and existence of causality in at least one direction. Private sector’s saving and investment
is also co-integrated with the national income suggesting the existence of long-run equilibrium relationship between national income and
saving and investment of private sector. It is evident from the empirical results that there does not exist cointegrating relationship between
national income and private corporate sector saving. It may be noted that the existence of co-integration relationship between national income
and saving and investment of private sector is mainly because of the households sector rather than the private corporate sector.

Granger Causality

Given the results of the co-integration tests, one has to estimate the VECM/ VAR to determine the direction of causality between income,
saving and investment. If co-integration exists, the Granger-Causality test is performed under the vector error correction methodology.
Otherwise, as in the case of saving of private corporate sector and gross domestic product, the standard Granger-Causality test is performed
under VAR framework. The results of the causality tests under the VECM/VAR framework are shown in Table 3.

The bivariate Granger causality tests performed under VECM framework between saving and income and between investment and income,
show that there is uni-directional causality between gross domestic saving and national income and also between gross domestic investment
and national income. In line with the existing literature, it is evident from the empirical results that the causality is running from saving to
income rather than income to saving. It is further evident that investment leads to higher income, whereas, income does not lead to higher
investment. Under three variable VECM framework, it is empirically found that saving and investment collectively lead to higher income
in India. However, income does not lead to higher saving and investment.

Further, it is evident that private sector saving causes higher growth and vice-versa, whereas, private sector investment alone may not boost
the economic growth. Moreover, private sector surplus both in the form of saving and investment would boost economic growth. The
causation of growth from household sector and private corporate sector is further investigated separately. It is empirically found that
household saving is endogenous to growth, but household investment is not endogenous to growth. On the other hand, household sector
saving and investment collectively are endogenous to growth.

Bivariate granger causality test under VAR framework is employed for private corporate sector saving and national income and it is found
that national income leads to private corporate sector saving but not the vice-versa. In the case of private corporate sector investment and
national income, the test is performed under the VECM framework. It is found that private corporate sector investment leads to higher
growth and growth causes higher investment in the private corporate sector. Further, it is found that saving and investment of private
corporate sector are endogenous to growth collectively. Moreover, higher investment in the public sector improves economic growth,
whereas, higher growth does not necessarily foster higher investment in the public sector.

Table 3: Causality tests based on VECM/VAR: F statistic

Null Hypothesis F-Statistic Result
Entire economy
Gross domestic saving does not granger cause Gross domestic product 19.05 Reject
Gross domestic product does not granger cause Gross domestic saving 1.39 Do not Reject
Gross domestic investment does not granger cause Gross domestic product 18.88 Reject
Gross domestic product does not granger cause Gross domestic investment 2.53 Do not Reject
Gross domestic saving and investment does not granger cause GDP 21.33 Reject
GDP does not granger cause Gross domestic saving and investment 4.95 Do not Reject
Private sector
Private sector saving does not granger cause Gross domestic product 9.94 Reject
Gross domestic product does not granger cause Private sector saving 7.07 Reject
Private sector investment does not granger cause Gross domestic product 1.28 Do not Reject
Gross domestic product does not granger cause Private sector investment 15.49 Reject
Private sector saving and investment does not granger cause Gross domestic product 10.29 Reject
Gross domestic product does not granger cause Private sector saving and investment 17.97 Reject
Household sector
Household sector saving does not granger cause Gross domestic product 9.92 Reject
Gross domestic product does not granger cause Household sector saving 7.89 Reject
Household sector investment does not granger cause Gross domestic product 3.99 Do not Reject
Gross domestic product does not granger cause Household sector investment 17.32 Reject
Household sector saving and investment does not granger cause Gross domestic product 26.11 Reject

Gross domestic product does not granger cause Household sector saving and investment 8.80 Reject
Private corporate sector
Private corporate sector saving does not granger cause GDP 1.78 Do not Reject
GDP does not granger cause Private corporate sector saving 7.50 Reject
Private corporate sector investment does not granger cause GDP 6.06 Reject
Gross domestic product does not granger cause Private corporate sector investment 19.78 Reject
Private corporate sector saving and investment does not granger cause GDP 8.60 Reject
GDP does not granger cause Private corporate sector saving and investment 9.00 Reject
Public sector
Public sector investment does not granger cause Gross domestic product 22.03 Reject
 Gross domestic product does not granger cause Public sector investment 1.0

KEY INFORMATION ABOUT INVESTMENT IN INDIA

 India Investment accounted for 28.7 % of its Nominal GDP in Jun 2021, compared with a ratio of 34.3 % in the previous quarter.
 India investment share of Nominal GDP data is updated quarterly, available from Jun 2004 to Jun 2021, with an average ratio of
33.7 %.
 The data reached an all-time high of 41.2 % in Sep 2011 and a record low of 21.6 % in Jun 2020.

CEIC calculates Investment as % of Nominal GDP from quarterly Nominal Gross Capital Formation and quarterly Nominal GDP. Gross
Capital Formation is calculated as the sum of Gross Fixed Capital Formation, Changes in Stocks and Valuables. Central Statistics Office
provides Nominal Gross Capital Formation in local currency and Nominal GDP in local currency, based on SNA 2008 at 2011-2012
prices. Investment as % of Nominal GDP prior to Q2 2011 is based on a combination of SNA 2008 and SNA 1993, at 2004-2005 prices.

Related information about India`s Investment: % of GDP

 In the latest reports, India GDP expanded 0.4 % YoY in Dec 2020.
 India Nominal GDP reached 739.3 USD bn in Dec 2020.
 Its GDP deflator (implicit price deflator) increased 4.8 % in Dec 2020.
 India GDP Per Capita reached 1,947.4 USD in Mar 2021.
 Its Gross Savings Rate was measured at 31.4 % in Mar 2020.
 India's Investment: % of GDP in Jun 2021
India Investment accounted for 28.7 % of its Nominal GDP in Jun 2021, compared with a ratio of 34.3 % in the
previous quarter.
 CONCLUSION
 National Income refers to the money value of all the goods and services produced in a country during a financial
year. In other words, the final outcome of all the economic activities of the nation during a period of one year,
valued in terms of money is called as a National income.
 Savings refers to the money that a person has left over after they subtract out their consumer spending from
their disposable income over a given time period. Savings, therefore, represents a net surplus of funds for an
individual or household after all expenses and obligations have been paid.
 An investment is an asset or item acquired with the goal of generating income or appreciation. Appreciation
refers to an increase in the value of an asset over time. When an individual purchases a good as an investment,
the intent is not to consume the good but rather to use it in the future to create wealth.
 INCOME in India showed a drop form 2010-2012,whereas 2013-2016 indicated increase in income and
gradually started to decrease from 2015 and became negligible low in 2019-2021 .
 Investment even in pre Pandemic and post pandemic showed gradual rise.
 There are two aspects of Savings and Investment: Ex ante and Ex post

This research provided valuable facts, data, trends and explanations about Savings, Income and
Investment

BIBLIOGRAPHY
 National youth library.com
 Rbi.Org.in
 Macrotrends.com
 Worldbank.org
 Economictimes.in