Phenomenal rise of India's savings

By Kaushik Basu Professor of economics, Cornell University

India's economy is changing fast

One economic variable that eludes popular attention but is arguably the most important indicator of an economy's long-term health is the savings rate.

The savings sprint over the last three years... is the most unexpected and most important change that has occurred in the economy in recent times.

A nation's savings rate or investment rate - the two are usually closely aligned - is the fraction of the nation's total income that is saved or invested.

In India, amid all the news of the dogged rise of the nation's foreign currency reserves, the obduracy of inflation, and the waxing and waning of the Sensex (not to mention Shilpa Shetty's moods), what has gone unnoticed is the phenomenal rise of the savings and investment rates.

These now stand at 32% and 34%, respectively. Read more