To achieve an annual economic growth of 8%, India needs an investment rate of 36% of gross domestic product (GDP), the Pension Fund Regulatory and Development Authority Chairman Deepak Mohanty said on Tuesday.
“As we aspire to be a high–income country over the next 25 years, we need to be growing on an average of around 8% per annum. This will require commensurate levels of investment,” Mohanty said addressing the CII Financing 3.0 Summit in Mumbai.
In the first quarter of FY25, the gross fixed capital formation (investment) rate was 34.8% of GDP. Indian economy grew by 8.2% in FY24 and is projected to grow around 7% in FY25.
In this context, efficient conversion of savings to capital formation is crucial, he said.
“This (investment) has to largely emanate from domestic saving. Of course, we can afford capital from abroad, which we have been doing for years, but there is a limit as it has an implication for our external balance,” he said.
Components of household gross financial assets indicate that during the years 2000-16, on average 81% of the financial assets were held in cash and bank deposits with investment in bonds and equity averaging 3%.
In more recent years, 2017-22, the share of cash and bank deposits has declined to 46% and that of bond and equity has risen to 7%.
Financial savings for social security such as in insurance, pension and small savings have shown a steady increase, Mohanty said.
The change in financial behaviour and attitude, from safe or risk-averse to taking risks for growth of wealth, is quite evident from the rise in Demat accounts holder (16.2 crore), MF SIP accounts (9.34 crore), emergence of a number of online equity trading platforms, the share of retail investors in equity cash segment turnover rising to 36% in 2023-24 from 12% in 2013-14.