Improving India's saving performance

Abstract

How should India raise its domestic saving rate? Traditional tax and interest rate incentives are unlikely to lead to a strong response of the private saving rate. Instead, the most promising way to boost domestic saving is through increased public saving and a strong structural reform program, including financial liberalization, which would initiate a virtuous circle in which higher growth would prompt further increases in private saving. With a view to increasing the efficiency of savings allocation and financing the heavy infrastructure needs of the Indian economy, particular attention should be paid to long-term saving instruments.