Role Of Saving In Economic Growth

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Saving is one of the main factors to increase investment and economic growth is unquestionable. Accumulation of saving can be consider as the sources of capital stock to which play a crucial role in creating investment, production, and employment and all these activities eventually enhance the economic growth. The role of savings and investment in promoting economic growth has received considerable attention in India since independence and in many countries around the world. The central idea of Lewis’s (1955) traditional theory was that increasing savings would accelerate growth, while the early Domar-Harrod models specified investment as the key to promoting economic growth. On the other hand, the neoclassical Solow (1970) model argues that …show more content…

As per the neoclassical growth model led by Robert Solow (1956) reveals a clear connection between saving and economic growth. The model indicates that higher saving leads to higher investment, which in turn leads to higher economic growth. The presupposition is that higher saving contributes positively to economic growth; therefore, this has led to strong macroeconomic policy recommendations for development in many countries.
Rational of Study:
Since saving is one of the main factors to increase investment and economic growth is unquestionable. Accumulation of saving can be consider as the sources of capital stock to which play a crucial role in creating investment, production, and employment and all these activities eventually enhance the economic growth. India has different forms of savings of which household savings generally constitute the largest share in aggregate domestic savings. On the basis of this back ground study would is based on to find out the relationship between saving, investment and economic growth in India since reforms period.
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