Borrowing to consume

Consumption-based borrowing by the household sector makes investment capital even more expensive

Unlike many developing countries, India is blessed with a high rate of domestic savings. The ratio of gross domestic savings (GDS) to gross domestic product (GDP) rose from 15 per cent in the 1960s to peak at 35 per cent of GDP in 2012. It has since fallen to settle at around 30 per cent.
 

This has meant that India is able to afford high rates of investment. Hence, despite low productivity, we can expect the floor growth rate to be around 5 per cent. It also means that the government can borrow entirely domestically to finance the fiscal deficit