In India, propensity to consume is fairly high. Why is it that the manufacturing sector in India shows a low rate of growth because of low demand?
Dear student,
In India, the propensity to consume is high because of the low income of people. Due to the low income, they spend majority of their income on food clothes and other related items. After spending a major portion of the income on food and other related items, they left with almost no savings or very little savings, and because of that, they have limited capacity to buy manufactured goods. Thus, the demand for manufactured goods remains low and because of that, the manufacturing sector in India shows a low rate of growth.
Regards.
In India, the propensity to consume is high because of the low income of people. Due to the low income, they spend majority of their income on food clothes and other related items. After spending a major portion of the income on food and other related items, they left with almost no savings or very little savings, and because of that, they have limited capacity to buy manufactured goods. Thus, the demand for manufactured goods remains low and because of that, the manufacturing sector in India shows a low rate of growth.
Regards.