These factors will facilitate both rise in saving and capital formation and are expected to further reinforce the virtuous cycle of growth in future. The existing studies on India suggest a near one-for-one relationship between the dependency ratio and national savings.
According to recent studies (Goldman Sachs 2007), 1 percentage point decrease in the dependency ratio adds 0.8 per cent to the national saving ratio. Rodrik and Subramanian (2004) used estimation results by Mulheisen (1997) on India's consumption behaviour, which shows a one-to-one relationship between the dependency and saving ratios.