Relation between GNS and TI

Gross national saving is derived by deducting final consumption expenditure from Gross
national disposable income, and consists of personal saving, plus business saving, plus
government saving, but excludes foreign saving.
Total investment of a nation is the amount of money invested on it by various members,
which may be individual or institutions at domestic level and/or international level.
The Solow Hypothesis states that: growth of Gross Domestic Savings (GNS) was the cause of
the growth of Gross Domestic Product in advanced economies, as well as in emerging and
developing economies. While growth of Gross Domestic Product was not the reason for the
growth of Gross Domestic Savings in developed, emerging, and developing countries. Thus,
the relation between GNS growth is one way with savings effecting the economic growth.
this is also true when the total savings fall, the economy will experience a slower growth or
stagnation and in the worst case fall in its productivity. Thus, most countries across the
world tries to maintain a limit for their savings to ensure a stable growth and prevent
economic crisis. This is done by ensuring that the expenditure and investment ratio is low
and that in times of depleting national savings there are more investment being done.

Trends
There are three main trends seen in the graphs of GNS and TI:

 Generally, during or after a sharp fall in GNS there is an increase in TI of a country for
developed, Emerging Asian, and Sub-Saharan nation.
 Sharp rise in TI leads to an increase in GNS.
 For stable and large economies curves of GNS and TI are almost same and tends to
be above a certain threshold while in case of smaller economies there is no such
threshold and either of the curves leads the other.

Explaining these trends

For all Developed Nations and stronger economies from Emerging Asia and Sub-Sahara, the
government and varies monetary bodies decide a minimum amount (in percent of GDP) of
National Savings the country must have in all times for a more stable economic growth.
When the savings starts falling towards the level, these bodies make policies more desirable
to investors to attract them and this invested money is used to promote major economic
activities which in turn increases the GDP and would help in increasing revenue that should
readjust the savings. Through this process is followed by most nation, these nations
(developed ones in particular) have more control and stability in this process. They would
plan for long term and ensure the policies made to attract investors won’t harm them in the
future.

In the case of the weaker economies of Emerging Asia and Sub-Sahara, there are almost no
threshold for the national savings. This makes them susceptible to sharp rise and fall in
there GNS. Also, due to being very poor these countries lack proper infrastructure which
does not make them investment friendly. Hence their national income falls they are forced
to introduce policies to attract investors that might be detrimental to them in the future.
Also, most of their investments come in the form of foreign relief funds. Due to these
reasons the trends total investment leads the economic growth of the country, making
them very dependent on these investments. Thus, savings curves might just follow the trend
of investment, or it is just a upscale version of the investment curve.

Case Study
STABLE ECONOMICS
Let’s take the case of India, it can be considered to be stable economy and it can be
demonstrated in the fact that both of its Gross National Saving and its Total Investment has
not gone lower than twenty percent of its GDP. After 1991 crisis, India has mange to remain
‘afloat’ and has shown growth in the worldwide 2020 covid economic crisis. We can
contribute this to better policies taken by the government to keep a substantial nation
saving and promise attractive terms to the foreign and domestic investor.
*Enter graph of GNS and TI of INDIA
Compering the GNS and TI graphs of India we can observe that they have almost identical
trends, peaks and fall in the curves are at the same year or at one-two year gap. Taking the
90s for example, there is a sharp fall of both savings and investment in 1991 (Indian
Economic Crisis of 1991) which is followed by rise in investment in 1992 (reliefs from
international groups) and again in 1994, this help India to create some key infrastructural
and economical reforms to better its condition. The national savings remain almost stagnant
during the period but increased during 1994 as the condition improved. There are minor rise
and falls across the years in both curves and both investment and national savings peaked in
2008. Followed by sharp fall in the total investment in 2009, due to the 2008 global
recession many foreign investors withdrew their money across the globe, but the fall in
national savings were not so sharp. Post demonetization (2016) we can see a rise in
investment as the government made various reforms and promote laws to attract direct
investment. This can also be contributed to the fact that India is the largest market in the
world. We also see a sharp drop in investment in 2020 due to the pandemic in comparison
the fall in national savings is almost negligible.
Just like the Indian economy most of these stable economies follow the same trend in their
GNS and TI. Through India being the largest market does help to bring in many investors
most of the developed nations that does not have such large market still follow almost the
same principle. To show this let us look at Italy with a population of 60 million and arguable
a very small market compared to India. Although we have taken Italy, most of the developed
nation are same with their low population density.
*Enter graph of GNS and TI of ITALY
Comparing the GNS and TI curves of Italy we can see that curve follow almost the same
trends, the only difference can be seen the 1990s. We can see that for most of later 90s to
mid of 2000s, both GNS and TI are almost constant. In 2009 and 2012, there was fall in total
investment and this was followed fall in national savings next few years. Through national
saving was down for a few years both GDP and PPP during those years were stable. Post
covid there is a sharp increase in national savings and total investment have been also
grown to stable levels.
UNSTABLE ECONOMIES
Now let’s look at the case of the poorest country, Burundi from the Sub-Sahara region.
Through Burundi is taken to an extreme case most of the countries in the region faces the
same problems and often have similar, if not identical, operation module. Upon comparing
the GNS and TI curves of Burundi we clearly see drastic changes in the total savings of the
country, it even reaches negative percentage in certain years. Another feature different
from the curves discussed earlier is that total investment is always lower than total
investment, and considering the state of living in the country, it is same to assume that most
of the investment comes as relief programme from international groups. With this
assumption we can explain the why a fall in total investment is followed by a sharp fall in
national savings. In 92 we can see a decline in investment and in the following year there is
fall in the national saving. Also, stagnant investment can either lead to increase in savings or
it's fall. While in the case of Burundi it is mostly fall in national saving.
*Enter graphs GNS and TI of Burundi