Households' savings preferences appear to have shifted towards financial savings. Generally, financial savings of one sector which is likely to mirror in the financial dissavings of another sector - this is a macro- economic identity. This is because when the household sector buys a financial asset, another sector (either the government or the corporate sector) issues a corresponding financial liability (debt or equity). A shift to household financial savings can be positive if the corporate sector invests these savings well and delivers on the return expectations of the households. The savings that are being placed at the disposal of the corporate sector, currently, are larger than its ability to deploy them profitably.

Source: Economic Times February 08, 2018 05:03 UTC