India’s household savings declined to just 5.1 per cent of India’s GDP in FY23, compared to 7.2 per cent of GDP in FY22, according to RBI data. Meanwhile, liabilities surged to 5.8 per cent of GDP in FY23, the highest levels since Independence, according to official data.
Indian household savings have declined to their lowest levels in 34 years. (Photo credit: Pixabay)
New Delhi: Indian household savings have declined to their lowest in 34 years at Rs 13.77 lakh crore, equal to just 5.1 per cent of India’s GDP, according to data released by the Reserve Bank of India. The central bank in its monthly bulletin said that Indians saved 19 per cent less in FY23, compared to FY22, according to data shared by RBi in its monthly bulletin.
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What are household savings?
Household savings are the foundation stones of economic growth since they provide the seed capital for financing multiple projects across sectors. Banks may use these to extend loans to businesses, and the Centre may borrow against the same.
What were the net financial savings in FY22?
In FY22, household savings stood at 7.2 per cent of India’s GDP, down from 11.5 per cent in 2020-21, during the peak of the COVID-19 pandemic as spending avenues declined since people stayed at home.
In FY20, household savings stood at 8.1 per cent of GDP.
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What about liabilities during FY23?
In FY23, liabilities rose by 76 per cent as financial assets grew at 14 per cent, according to RBI data.
Bank deposits were up 32 per cent, while the figures for deposits in small savings except PPF came in lower than for FY22. Commercial bank loans to 54 per cent year on year in FY23.
Household financial assets decline
Household financial assets were down to 10.9 per cent of GDP in FY23, compared to 11.1 per cent of GDP in FY22.
In FY23, liabilities climbed 5.8 per cent of GDP compared to 3.8 per cent of GDP in FY22. Liabilities in FY23 surged to the highest level since Independence.
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Why is this statistic troubling?
The decline in savings and weaker income levels accompanied by rising consumption does not make for a sustainable trend, according to Nikhil Gupta, economist at Motilal Oswal.
RHis could also be worrying based on indications of a slowdown in rural wages and consumption of non-durable goods, the Financial Expres reported, citing HSBC India economist Pranjual Bhandari.