Trends and Determinants of Private Corporate Sector Savings in India

The corporate savings rate in India has remained at a relatively low level throughout the long period of 1966-2000 and has, in fact, declined in the recent past, which is a worrisome matter if the planned high rate of economic growth with stability is to be achieved. It appears that profits after tax, investment opportunities, availability of external funds, cost of borrowings and cost of equity are the important determinants of the savings of the private corporate sector in India. This paper analyses the trends in private corporate savings in India during this period, and uses dynamic panel data for empirically identifying the factors which influence corporate savings decisions. The period analysis has also been carried out to gauge the impact of liberalisation on the behaviour of corporate savings in India.