For the first time in post independence India, GDP growth rate averaged more than 5 per cent annually in two consecutive plan periods. The average between 1980-81 and 1989-90 works out to be 5.7 per cent. The average per capita income growth in the same period was 3.3 per cent annually - despite no significance decline in the population growth rate.

Savings in the household sector continued to rise, going up from 16.1 per cent of GDP in 1980-81 to 17.8 per cent in 1989-90. More important, the share of financial savings in the household sector increased from 6.3 per cent of GDP to 8.9 per cent during the same period. The share of physical savings in the household sector simultaneously declined - reflecting a distinctive financial deepening of economy.

This resulted in the rate of net domestic savings falling from 13.5 per cent in 1980-81 to 12.7 per cent in 1989-90. The decline was in spite of a improved rate in the case of both the household and private corporate sectors. Clearly, the public sector has been a drag in more ways than one.

The two sets of trends - positive and negative - reveal to a large extent the reasons behind the current economic crisis. On one hand, while capital formation (investment) did not increase significantly, the growth rate of GDP was consistently high on the average gap jumping from an average. This resulted in the resource gap jumping from an average of 1.4 per cent of GDP during the sixth Plan to 2.4 per cent in the seventh Plan period. The resource gap in 1989-90 was Rs. 10,000 crore.

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