India can increase the available capital for investment by a combination of two strategies, suggest Mohan Guruswamy and Zorawar Daulet Singh in ‘Chasing the Dragon: Will India catch up with China? ( “First, increase the level of its domestic savings and channel them efficiently. Second, run a current-account deficit (capital-account surplus) to draw in external savings to finance growth.”

The authors caution, however, that the second option has adverse implications on the exchange rate, with effects counter to the export-driven development that India sees to achieve. Therefore, they reason that mobilising internal savings both by fiscal consolidation and efficient capital allocation by the intermediary banking sector is likely to yield robust saving rates to finance long-term growth.

“Insofar as the favourable demographic structure (i.e. falling age-dependency ratio) will further buttress household saving rates, it is another positive variable in ensuring growth can be financed by indigenous capital.”

The book cites insightful statistics such as that Indian households invest just half of their savings in bank deposits, and that our banks lend only 61 per cent of their deposits, roughly half the G-7 average. And the remainder of bank deposits, around 33 per cent, gets channelled in Government securities, even as the corporate bond market is still nascent, at 2 per cent of GDP.

“Thus, further financial-sector reforms will increase the size of India’s financial system, which is so vital in ensuring that savings are allocated efficiently and quickly,” argue Mr. Guruswamy and Mr. Singh.

Interestingly, they find that India’s corporate and public-sector savings are considerably lower than the corresponding numbers in China, whereas Indian households save more than their Chinese counterparts. “In fact, there is a wide 15-18 percentage point different between enterprise saving in China and private corporate saving in India, which accounts for bulk of the difference in the aggregate saving between the two countries.”

Recommended read.


In the realm of hypothesis

To arrive at the damages in an insurance claim, it may be necessary to ascertain the net income of the deceased available for the dependants, and then capitalise the same by ‘multiplying it by a figure representing the proper number of years’ purchase.’ Much of the calculation necessarily remains in the realm of hypothesis, a region in which arithmetic is a good servant but a bad master, notes the Institute of Chartered Accountants of India in Motor Third Party Claims Management ( “In every case, it is the overall picture that matters, and the court must try to assess as best as it can to compensate the loss suffered.”

For instance, the courts have held that the words ‘net income’ can be ordinarily mean ‘gross income minus the statutory deductions.’ There is also an old precedent to support the view that income is not confined to receipts from business, and means periodical receipts from one’s work, land, investment etc.

The publication notes that if the dictionary meaning of the word ‘income’ is taken to its logical conclusion, it should include those benefits, either in terms of money or otherwise, which are taken into consideration for the purpose of payment of income-tax or profession tax, although some elements thereof may or may not be taxable or would have been otherwise taxable but for the exemption conferred thereupon under the statute.

For the professionals’ shelf.


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