It is common knowledge that any household's general tendency is to spend less than what it earns. But when the expenditures to meet basic necessities like housing, food, transports, healthcare, taxes, etc., exceed earnings, the household in question cannot save. If the pattern of less income than expenditure persists nationwide for long, then that is bad news for the economy concerned. For household savings remains an important element of Gross National Savings (GNS) which, according to a report published in this paper a couple of days back,  fell by 0.74 percentage point during the just-concluded financial year (FY).  The decline in GNS, however, has been a constant phenomenon since the FY23 when it peaked to 29.95 per cent of GDP. The fall in household savings was not solely responsible for the decline in GNS during all these years. Other two major components--- corporate savings and government savings were equally responsible. 

Economists have expressed concern about this pattern of persistent drop in GNS rate as it points to something that is not incidental, but

structural in nature so far as the overall economy is concerned. In this connection, the macroeconomic indicators including the inflation rate have remained high despite the successive government's strict monetary policy.  The consumer price index, for instance, has, of late, been stubbornly soaring at around 9.4 per cent. The net outcome of it all is that the common household's expenditures, that is, its cost of living, has been rising. Increased food and utility prices have eroded the households' purchasing power. Lower- and middle-income families are being forced to eat into their savings or become indebted to meet daily expenses. The common households have been left with virtually no disposable income to save. The state of business activities does not need any elaboration. When households do not have enough to spend, banks become shy to offer funds due to liquidity shortage and businesses obviously suffer heavily. This again hurts government's revenue earnings, leading to shortage of investable funds.  

Since domestic investments come from national savings, a declining savings rate has been stifling economic expansion, which is severely impacting key sectors like infrastructure and manufacturing. Thus private sector investment remains stagnant, Economists have also pointed out that savings and investments are inextricably linked. All these developments including an uncertain business environment, high cost of fund (due to high rate of bank interest), etc., have militated against fresh private investment and reduced incentives for households as well as businesses to save. 

The present elected government that has inherited a problem-ridden economy is trying to make a turnaround. But it is aware how difficult the job is. That is why the incumbent finance minister has sought a couple of years' time to put the economy on track. With the government's revenue earnings remaining at a deplorable level, financial institutions limping and bureaucracy performing well below the desired level, it is hard to expect any meaningful change in major macroeconomic indicators, including GNS. A reverse trend in GNS, however, is all the more necessary to support economic growth. The government will have to work hard to tame inflation, boost its revenue earning and infuse dynamism in corporate activities in order to make that happen.