India’s household-sector savings, the biggest source of investment for the economy, have “worryingly” dipped to a decadal low, while retail loans to the sector are growing annually in double digits, pointing to profligate consumption by households, economists have warned.

Financial liabilities of households are mounting, which is not a good sign, experts say. The country’s savings rate, or the share of gross domestic savings in the gross domestic product (GDP), has come down to 30.5% in 2018, latest available official data show, compared to nearly 37% in 2008.

Household savings are the largest source of funds for the economy, as they are a net supplier of funds to both the corporate and the government sector. In any economy, investments are taken to be the equivalent of savings because income not consumed must be saved, which is then used for investment.

India’s investment needs are generally far larger than can be met by domestic savings alone. The shortfall is met by costly foreign savings, which is what the country’s current account deficit shows.

A boom in consumption, or spending on various goods and services, from electronic gadgets to holidays, is evident from the flow of retail loans to households, which are growing at a robust 17% annually.

Credit or loans are fast shifting from the corporate world to the household sector because of India’s pile of corporate bad debt, known as the non-performing assets, or NPAs. For five years in a row, retail credit has been the fastest growing loan segment.

Poor savings have been a largely “addressed” reason for the country’s continuing slowdown, economist NR Bhanumurthy of the National Institute for Public Finance and Policy said. In the January-March quarter, the country grew at its slowest pace in five years at 5.8%.

Domestic savings are made up of corporate savings, public or government savings and household savings. Data from the Central Statistics Office show that it’s the household savings rate that has dipped the most. A country’s GDP denotes the value of all goods and services produced in a given period, the broadest measure of income and output.