It is accepted by wide consensus that the Indian economy acquired a second wind in 2003-04 and moved to a new trajectory of near double-digit growth.^[1]There is also general agreement that one of the most significant contributions to the new growth momentum came from the rise in gross domestic savings. After being in negative territory for years together，public sector saving turned positive in 2003-04 and has since continued to increase strongly. Also turning in a strong performance in the early part of the decade was private corporate saving，which increased from between 3.75 and 4.75 percent of GDP in the first four years，to over 7 per cent in 2004-05 and all subsequent years. The year 2008-09 brought about a partial reversal of both these trends，since private corporate sector earnings were deeply eroded by the global economic downturn，and the compulsion of fighting the recession through a fiscal stimulus obliged the public sector to undertake a number of fresh expenditure commitments. Household savings also increased in the years beginning in 2003，though after a relative lag in relation to the public sector and private corporate sector.

The public sector began to boost its total savings after the enactment of the Fiscal Responsibility and Budget Management Act of2001. From the financial year 2002-03，there has been an effort to restrain the growth of expenditure，that has fetched results in the following years. And to silence the critics，the burden of adjustment has been borne in the main by what are classified as the “non-developmental expenditures” of central and state governments.^[2]The softening of interest rates，which led to smaller debt servicing obligations on accummulated public sector borrowings，had a role to play here，as did the relative moderation in the growth of the defence budget over the relevant years.

Savings by Sector as % of GDP

On the other side of the story，revenue receipts of both the central and state governments grew rapidly through these years. As a percentage of GDP，tax receipts at these two tiers of the government showed signs of regaining the levels they were at，prior to the inauguration of the economic reforms in 1991.

There are few comprehensive studies of the growth of private sector profitability in the first decade of the 2000s. But evidence points to robust growth in sales and good earnings under the head “other income”，^[3]suggesting good returns on corporate investments in shares through this period of a virtually uninterrupted bull run in the country’s stockmarkets.

Another notable change occurred in the country’s growth profile in this period：the growing interest of foreign investors. After a decade-and-a-half of fairly indifferent or only sporadic interest in the Indian market-as a destination for both direct and portfolio investment-foreign capital began flowing in to Indian stockmarkets in significant magnitudes from about 2003-04. Direct investment though，remained modest even through these years，but registered sharp upticks in 2007-08 and the following year.

Portfolio investments though large in volume，have remained volatile，with large inflows typically being accompanied by large withdrawals. Thus after registering a historic high of 2.52% of GDP in 2007-08，net portfolio investments （i.e.，inflows less outflows） fell to a negative figure the following year as investors pulled out in the wake of the global economic meltdown，to put their money into shoring up falteringstockmarkets in their home countries.

FDI （Inflows net of outflows）Portfolio Investment （Inflows net of outflows）

What is classified as FDI too is a very ambiguous entity. Research by the economist Chalapati Rao indicates that over half the inflow of FDI in the period of interest originated in known tax havens，especially Mauritius. A large part of the inflow was for acquisition of shares in existing companies and cannot be deemed to have added to productive capacity. And over 70% of the inflow was in the services sector-notably real estate and construction and financial services-as against just over 20% in manufacturing.^[4]

As interesting as the Indian growth story since 2003-04-perhaps more so if the connection between the two were to be drawn out-has been the huge appreciation in asset prices since then. Stock values for instance，multiplied manifold. Taking just the one indicator of the market capitalisation on the Bombay Stock Exchange，i.e.，the total value of shares listed on this most active of India’s bourses，went up from just over 23% of GDP in 2002-03 to over 100% in 2007-08.^[5]The following year，the figure collapsed though it was still many times higher than before the escalation began.

Anecdotally，note could be taken of similar trends in the real estate market too. The absence of a reliable index of real estate values makes a definitive assessment of this phenomenon difficult.^[6]From RBI d