Financial savings in mutual funds and economic growth
- 1CMP Degree College, Prayagraj, India
Int. Res. J. Social Sci., Volume 10, Issue (3), Pages 52-61, July,14 (2021)
The famous Say’s law of market ‘Supply creates its own demand’ which was very plausible in 17th and 18th century with the introduction of paper currency and non valuable metallic money, the law fails. In case of goods and services consumption + savings will always be equal to consumption + Investment in long run because goods can either be consumed or saved for future consumption or invested. With paper currency Savings need not be identical to investment as savings could be used for speculative activities. The dichotomy of savings and investment was demonstrated by Keynes in his general theory. Saving is one decision made by household and is a function of Income. Investment is a decision of investor and is a function of interest rate and marginal efficiency of capital. Thus, economic growth which is a function of investment could be impacted if more and more savings could be channelized into investment. Mobilizing savings with efficiency and channelizing in to investment depends on financial sector. Modern Economists believe that an efficient financial sector is a precondition to economic growth. Financial sector comprises of various financial institutions, markets and Instruments. In most developed countries Mutual Fund Institutions with a large number of instruments have become an important vehicle of mobilizing and channelizing savings into productive and profitable investment. In this paper the researcher has tried to analyse growth of savings and investment in India since 1991. Part I of the paper presents the overview of gross domestic savings and gross domestic investment in India since 1991. Part II of the paper analyzes different forms of financial saving in India and financial sector growth. Part III of the paper analyzes the role of Mutual Fund Industries in promoting investment. Part IV deals with main findings and conclusions.
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