Understanding Gross Domestic Saving

We all know that GDP is the money value of all the final goods and services produced in the domestic territory of a country in a year’s time. So, Gross Domestic Product (GDP) measures the total output of goods and services for final use occurring within the domestic territory of a given country, regardless of the allocation to domestic and foreign claims.
A part of this total monetary value i.e. GDP is consumed. What left after the consumption is "saving". So, Gross Domestic Saving is the Gross Domestic Product minus final consumption.
The saved money is either kept with the public or is invested back. When the money is invested back, we come to the figures known as Capital Formation. The Ratio of saving and investments is very important for the economic health of the country.
  • Please note that Gross Domestic Saving is different from the Gross National Savings, which is equal to gross domestic savings (gross domestic product minus final consumption) plus net income and net current transfers from abroad.

The Gross Domestic Saving has two parts. One is Public Sector, another is Private sector. The largest segment of Private sector is the Household sector. Another segment of the Private sector is the private corporate sector. The relation of these components is shown as follows:

The above graphic shows that the components of the Gross Domestic Savings. The Household may keep the financial assets with them or the physical assets such as Gold and other valuables.

List of Topics : Economic Survey 2010-11

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