Introduction:
Household savings play a crucial role in the capital formation process in the Indian economy. These savings are a significant source of funds that can be utilized for investment purposes, driving economic growth. However, savings-led investments face several challenges in the Indian economy.

Challenges faced by savings-led investments:

1. Low savings rate: The savings rate in India has been declining over the years. According to the World Bank, India's gross national savings as a percentage of GDP was 30.5% in 2019, which is relatively low compared to other developing economies. This low savings rate limits the availability of funds for investment purposes.

2. Lack of financial literacy: Many households in India lack adequate financial literacy, which hampers their ability to make informed investment decisions. This lack of awareness about various investment options and financial instruments leads to suboptimal utilization of savings for productive investments.

3. Inadequate access to formal financial institutions: A significant portion of the Indian population still does not have access to formal financial institutions such as banks, which limits their ability to save and invest. Lack of access to banking services and other financial intermediaries hinders the mobilization of savings into productive investments.

4. Preference for physical assets: Indian households have a strong preference for physical assets like gold and real estate as a store of value. This preference often leads to a diversion of savings away from financial instruments that can be channeled into productive investments. This preference for physical assets also poses challenges in mobilizing savings for investment purposes.

5. Inflation and erosion of purchasing power: Inflation erodes the purchasing power of savings. High inflation rates in the past have discouraged households from saving and investing in financial instruments. This poses a challenge for savings-led investments as individuals tend to hold cash or physical assets to protect their savings from inflation.

6. Taxation and regulatory constraints: Taxation policies and regulatory constraints can discourage individuals from saving and investing. Complex tax structures and high tax rates may disincentivize savings, particularly in financial instruments. Regulatory barriers and bureaucratic red tape can also hinder the efficient mobilization of savings for investment purposes.

Conclusion:
Household savings form a crucial component of capital formation in the Indian economy. However, savings-led investments face challenges due to low savings rates, lack of financial literacy, inadequate access to formal financial institutions, preference for physical assets, inflation, and taxation and regulatory constraints. Addressing these challenges is essential to promote savings-led investments and ensure sustained economic growth.