An Empirical Analysis of Factors Affecting Gross Domestic Savings in India (1991 to 2023)

Abstract

This study examines the factors associated with gross domestic savings in India during 1991–2023. Gross domestic savings provide an important source of domestic resources for investment, capital formation and economic growth, especially in a developing economy where reliance on external finance may increase vulnerability. The study uses secondary annual data from the RBI Handbook of Statistics on Indian Economy and the World Bank. Gross domestic savings is treated as the dependent variable, while gross domestic product, broad money, inflation, tax revenue and bank credit to the private sector are used as explanatory variables. The analysis applies unit root testing through the Augmented Dickey-Fuller and Phillips-Perron procedures, followed by the ARDL bounds testing approach to examine long-run and short-run relationships. The results indicate the existence of a long-run relationship among the selected variables. Gross domestic product and bank credit to the private sector show positive and significant associations with gross domestic savings. In contrast, broad money and tax revenue show negative effects, while inflation is not statistically significant in the Indian case. The error correction term is negative and significant, indicating adjustment towards long-run equilibrium. The findings suggest that strengthening income growth, improving productive credit availability and encouraging household financial savings may support the mobilisation of domestic savings in India.