Savings-investment conundrum: Domestic savings key to sustainable growth

For growth to be sustainable, it must be financed by higher gross domestic savings because there is not much space to do so through external borrowing

India’s (nominal) investment was about 33 per cent of gross domestic product (GDP) in the past two years and is likely to be at similar levels in 2024-25 (FY25) as well (it was 33.8 per cent of GDP in H1FY25, the same as in H1FY24), better than the 31 per cent of GDP in the pre-pandemic years. More importantly, India’s current account deficit (CAD) was only 0.7 per cent of GDP in FY24 and likely at 1.6 per cent of GDP in H1FY25, compared to 1.2 per cent in H1FY24. With the CAD at around 1 per cent of GDP