India looks to domestic savings to enhance economy's potential

Mumbai

WHILE Indian Prime Minister Narendra Modi has racked up thousands of air miles seeking to woo foreign investors, tapping funds at home is just as crucial.

India's savings rate is at a decade low of 31 per cent of gross domestic product, weighed down by sputtering growth and Asia's third-fastest inflation. Mr Modi needs to get it back up to 35 per cent of GDP to fulfil the nation's economic potential, according to HSBC Holdings plc.

"You've got an infrastructure requirement, you've got an industrialisation requirement, and you have to fund it," said Anubhuti Sahay, an economist at Standard Chartered plc in Mumbai. "We cannot completely depend on foreign inflows."

Insufficient savings leave India more vulnerable to outflows triggered by events such as an expected increase in US interest rates or China's currency devaluation. China's savings rate is 50 per cent of GDP, and most Asian powerhouses have kept it above 30 per cent for decad…