# Introduction nvestment made by the government is the momentous factor for enhancing and sustaining economic prosperity. In order to finance investment required, a nation suppose to generate ample domestic savings or it has to scrounge abroad and / or develops FDI. According to Solow and Harrod Domar Growth Model, saving is a crucial factor for the economic growth of any nation, since it generates opportunities for investment which in turn boost up production and stimulates employment. Domestic savings aid in sustaining high growth rates through its impact on investment and also perform as a channel for magnetizing FDI whereas the over dependence on peripheral financing may erode competitiveness through an overvalued currency, providing additional motives for wanting to stimulate domestic saving. Gross Domestic Savings= Gross Domestic Product -Final Consumption Expenditure. The money thus saved is either held in reserve with public or is ploughing back for further investments which are known as Capital Formation. Capital Formation is one of the driving forces for the holistic economic development and insufficient or lack of capital formation in the economy may usher to under development of the economy. There are three important segments contributing to gross domestic savings and capital formation viz. household sector, private corporate sector and public sector. Considering the importance of domestic savings in capital formation and thus economic growth, this paper attempts to analyze and exemplify the contributions made by household sector, private corporate sector and public sector in gross domestic savings and thus the capital formation. # II. # Objectives of the Study The focal objective of the study is to analyze the contribution of private sector in terms of private corporate and household sector and public sector in ? The other objectives are To explore the flow of savings of each sector to the Gross Domestic Savings in order to ascertain the dominant contributing sector. ? To throw light on sectors having more contribution towards the capital formation. ? To measure the strength and statistical significance of each sector's contribution as predictors of GDS and GCF. ? To rank the sectors based upon the highest contribution in terms of gross domestic savings and gross capital formation. III. # Nature of the Study The present study is of analytical nature and makes use of secondary data. The relevant secondary data has been collected from reports of Union Budget of India 2014 and the following economic survey 2013-2014, the Ministry of Commerce and Industry, Department of Industrial Promotion and Policy, Government of India, Centre for Monitoring Indian gross domestic savings and thus the capital formation of India. Economy, Reserve Bank of India, World Investment Report and World Bank national accounts data. # IV. Review of Literature Khan and Reinhart (1990) in their empirical study titled "Private investment and economic growth in developing countries" formulated a simple growth model that separates the effect of private sector and public sector and supported the notion that private investment has a larger direct effect on growth than does public investment. The empirical studies conducted by Hadji Michael (1996), Ben-David (1998), Hernandez-Cata (2000), Ndikumana (2000) in Africa, Asia and Latin America have established that there exists critical linkage between capital formation and the rate of growth. This exemplifies that capital formation is a key to economic growth. Econometric evidence due to work done by Beddies 1999, Ghura andHadji Michael 1996, Ghura 1997 indicates that private capital formation has a stronger, more favorable effect on growth rather than government capital formation probably because private capital formation is more efficient and less closely associated with corruption. Mishra et al. (2010) studied the dynamic relationship between savings and investment in India for the period 1950-51 to 2008-09 by employing Johansen cointegration technique and Granger causality test via Vector Autoregressive framework. The authors found the presence of long run equilibrium relationship between saving and investment in India. The Granger causality test revealed directional causal relationship between the variables under study. Inuwa Nasiru and Haruna M. Usman (2013) in their paper "The Relationship between Domestic Savings and Investment: The Feldstein-Horioka Test Using Nigerian Data" found that there is a long run relationship between savings and investment. The study used the reduced-form bi-variate model of Feldstein and Horioka (1980) to examine the long-run relationship between domestic saving and investment and measure the degree of international capital mobility. Kanu, Success Ikechi & Ozurumba, Benedict Anayochukwu (2014) have employed multiple regression technique to study the impact of capital formation on the economic growth of Nigeria. It was ascertained that in the short run, gross fixed capital formation had no significant impact on economic growth; while in the long run; the VAR model estimate indicates that gross fixed capital formation, total exports and the lagged values of GDP had positive long run relationships with economic growth in Nigeria. It is clearly found that household sector contributes 73% to GDS and occupies the most dominant variable of GDS. The private corporate sector with its share of 22% to GDS holds second major contributor of GDS. Together, the private sector (Household + Private corporate) contributes 95% to GDS. It is then followed by public sector with a share of only 5%. Correspondingly, the household sector with its contributions of 68% occupies predominant position in total Gross Capital Formation and then followed by private corporate sector having 21% and public sector having only 5% and the rest 7% by other variables which are beyond the scope of this study. The value R determines the strength of relationship. The value of R between household sector and GDS is 0.991 which signifies more strong relationship between them and the relation is significant since the P value 0.000 is less than 0.05. Similarly, the R value between Private Corporate sector and GDS is 0.996 which symbolizes the intense relationship between them and the relation is significant (P value = 0.000 < 0.05). Correspondingly, the value of R between Public sector and GDS is 0.605 which denotes modest relationship between them and the relation is significant (P Value=0.029 < 0.05). The # 73% 68% 22% 21% 5% 5% Gross Domestic Savings Gross Capital Formtion # Sectorwise contributions to GDS & GCF analysis of three different values of R strongly reveals that the contribution made by Public Sector is not competent in comparison with other two sectors. In the same way, the values of R between different sectors and GCF indicate the degree of relationship between them. The scrutiny of different R discloses that public sector has less contribution to Gross capital Formation. # Conclusion Gross Domestic Savings and Capital Formation are keys to economic growth. The central opinion of this paper is that all the three sectors such as household, private corporate and public sector are statistically significant in determining the Gross Domestic Savings and Gross Capital Formation. Of which, the paper discovered that the Household sector's contribution is more than other two sectors. It is also found that the rise in GDS leads to more capital accumulation which will enhance productive capacity of the nation and in turn stimulate growth of the economy. ![? & P. Glorinthal ?](image-2.png "") No12007-20081118347469023248962183633219007622008-2009133087341746754280180262019313802009-2010163079954095510585218233823631322010-20111800174620300201268262174228414572011-20122054737658428111295282445932006332012-2013221241471314111791930434743521399TOTAL15005199463462610238302066365222123595% age contribution to GDS73225100% age contribution to GCF6821593 (Others = 7%)b) Analysis of Relationship between Contributions ofHousehold Sector, Private Corporate Sector andPublic Sector to Gross Domestic SavingsTable 2 reveals the strength of relationshipbetween contributions of sectors to GDS and CapitalFormation of a country.Figure No 1 : Sector wise Contribution to GDS & GCFThe above figure illustrates that household Savings and Gross Capital Formation sector occupies the first rank in contributions towardsGross Domestic Savings GDS and GCF followed by private corporate sector andYear public sectorHousehold Sector (Rupees in Crores) SECTOR Household SectorPrivate Corporate Table No 2 : Correlation Analysis Public Sector (Rupees in Crores) Sector (Rupees in Gross Domestic Savings Gross Capital Formation Total (Rupees in Crores) R R 2 P Value R R 2 P Value Crores) 0.991 0.982 0.000 0.995 0.989 0.000Gross Capital Formation (Rupees in Crores)2000-2001463750 Private Corporate Sector 0.996 810620.991-29266 0.0000.991515545 0.9810.0005282992001-2002545288 Public Sector76906 0.6050.366-36820 0.0290.573585374 0.3280.0415711462002-200356416199217-71486562306277432003-2004657587129816363728237757624162004-200576368521251974499105070310640412005-200686898827720888955123515112797542006-200799439633858415292914859091531433 No3 : ANOVA TableAmount in CroresSectorsMeanStandard Deviation F value P ValueDecisionHousehold Sector1154246.08599260.8128.530.000P value <0.05,Private Corporate Sectors 356509.69230453.11? H o is RejectedPublic Sectors78756.1587390.121Table No 4 : Tukey's HSD Test to determine homogeneous subsetSectorsN Subset for alpha = 0.0512Public Sector1378756.15Private Corporate Sector 13356509.7Household Sector131154246.1Sig.0.1551d) Analysis of relationship between Contributions ofthe dependent variable (Gross Capital Formation). FromHousehold Sector, Private Corporate Sector andthe table 5, the value R= 0.999 which indicates a goodPublic Sector to Gross Capital Formationlevel of prediction.A Multiple Regression Analysis is conducted toFrom the table 5, R 2 = 0.998 indicates thatpredict causal relationship among a dependent variable99.8% of the variability of the dependent variable (Gross(Gross capital Formation) and independent variablesCapital Formation) is explained by the independentsuch as contributions of household sector, privatevariables (Contributions of Household Sector, Privatecorporate sector and public sector.Corporate Sector and Public Sector to Gross CapitalThe value R called as coefficient of correlationFormation).indicates a measure of the quality of the prediction ofTable No 5 : ANOVA Table -Test for Regression Model FitANOVAbModelSum of SquaresDegrees of FreedomMean SquareFSig.RR 21Regression1.267E1334.223E121743.157.000 a.999 a.998Residual2.180E1092.423E9Total1.269E1312a. Predictors: (Constant), Public Sector's Contribution , Household Sector's Contribution, Private Corporate Sector's Contributionb. Dependent Variable: Gross Capital Formation Table 7 shows the contribution of GDS to GCF. The value of R = 0.998 indicates that there exist a powerful relationship between GDS and GCF i.e. the contribution of GDS to GCF is more whenever there is hike in GDS. The regression significant value 0.000 ( p < 0.05) implies that the regression model is the best fit for the data and the independent variable (GDS) is statistically more significant to predict the dependent variable (GCF) (p < 0.05). The linear relationship between GDS and GCF can be established as * the impact of capital formation on the economic growth of Nigeria SuccessKanu &Ikechi BenedictOzurumba Anayochukwu Global Journal of HUMAN-SOCIAL SCIENCE: E Economics 14 2014 Issue 4 Version 1.0 * The Relationship between Domestic Savings and Investment: The Feldstein-Horioka Test Using Nigerian Data InuwaNasiru MHaruna Usman CBN Journal of Applied Statistics 4 1 2013. June, 2013 * PKMishra JRDas SKMishra The Dynamics of Savings and Investment Relationship in India 2010 18 European Journal of Economics * Raising Growth and Investment in Sub-Saharan Africa: What Can be done? 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