On the same day as RBI unveiled a 75-basis-point hike in CRR, the Central Statistical Organisation released revised national income accounts statistics involving an important shift in the base year of calculation from 1999-2000 to 2004-05.

The new figures are even more revealing about the period of the crisis than the old figures were, especially on savings and investment. Calculations using the new base year of 2004-05 show that domestic savings dropped sharply (3.9 percentage points) to 32.5% of GDP in 2008-09. Consequently, gross capital formation or investment slowed down by 2.8 percentage points to 34.9% of GDP, thereby providing ample evidence of the basic reasons behind the sudden deceleration of the growth rate from 9.2% in 2007-08 to just 6.7% in 2008-09.

But which sectors (when the accounts are disaggregated) account for the slide in savings and investment? Overall, while the primary factor contributing to the fall in the domestic savings rate was the sharp decline in public sector savings, the largest hit on the investment side was taken by the corporate sector where even the absolute amount of investments has declined. Apart from falling investor sentiments in the corporate sector, the large demand for additional resources to compensate for the fall in public sector savings seems to also have had an impact on the ability of corporates to mobilise resources for investments.

The numbers on the different components of savings show that public sector savings fell sharply from a high of Rs 2,49,660 crore in 2007-08 to just Rs 79,997 crore in 2008-09, pulling down the public sector saving-GDP ratio from 5% to 1.4%. The share of public sector savings in total domestic savings shrunk sharply to 4.4%, just one-third of that in the previous year.

The bulk of the fall in public sector savings has been accounted for by the huge deficits in the accounts of the government administration where the savings of Rs 27,232 crore in 2007-08 were reversed with the administration borrowing Rs 1,41,634 crore in 2008-09. However, the deterioration in the other components of the public sector savings was relatively milder. While gross savings of non-departmental enterprises (public sector units sponsored by the central and state governments) declined marginally from Rs 1,93,388 crore to Rs 1,93,150 crore, those of departmental enterprises (railways and telecom PSUs) declined from Rs 29,040 crore to Rs 28,481 crore during the period.

The fall in two other components of domestic savings, namely private corporate sector and households, which together account for around four-fifths of the domestic savings, was also benign. So, though the savings rate of the private corporate sector, which accounts for a quarter of the total savings, went down marginally from 8.7% of GDP in 2007-08 to 8.4% in 2008-09, the absolute amount of savings went up from Rs 4,31,588 crore to Rs 4,70,256 crore during the period. And the household sector savings, the largest component with more than a two-third share, remained stable at 22.6% of the GDP, though its financial component slowed down from 11.2% to 10.4% of GDP during the period.

The relative stability of household and corporate savings may help explain some of the resilience of the economy through the crisis.

On the investment front, the corporate sector, which emerged as the largest investor in the second half of the decade, took the biggest hit. Corporate investments declined from Rs 7,95,995 crore in 2007-08 to Rs 6,79,904 crore in 2008-09, pushing down the corporate investment-GDP ratios from 16.1% to 12.7%, a 3.4 percentage fall, which is the sharpest ever fall registered by this segment in the national account statistics.

Numbers on gross fixed capital formation show that the real impact of the fall in corporate investments was more on investments in machinery and equipment than on construction. In fact, corporate investments in construction went up marginally both in absolute and relative terms while investment in machinery and equipment saw the highest fall ever registered. Interestingly, the sharp fall in the savings of the public sector seemed to have made no dent in their investments, which climbed from Rs 4,42,177 crore in 2007-08 to Rs 5,24,241 crore in 2008-09, pushing up the investment-GDP ratio from 8.9% to 9.4%. But the improvement in public sector investment, which has been financed by large borrowings from the private sector, was only about one-seventh of the fall in private corporate investments.

Surprisingly, the overall fall in investments seems to have made no impact on household sector investments, which largely include investments made on farm households and small-scale industry units. These picked up to 12.2% in 2008-09, the highest across the last four years. Perhaps one more reason why the economy showed great resilience and will likely bounce back fast in 2009-10 and 2010-11.

p.raghavan@expressindia.com