Preliminary estimates suggest a further sharp drop in household financial savings in 2011–12 at less than 8.0 per cent of the GDP from more than 12 per cent two years back. Also, corporate investment is likely to have declined further.
With falling saving and investment, rise in twin deficits and inflation, potential growth had also dropped by one percentage point or more in the post-global financial crisis period. As we know, potential growth indicates the rate of growth the economy can achieve consistent with stable macro-economic conditions.