In a stark financial transformation, households in India faced a severe downturn as their net financial savings dwindled by a staggering 55 percent in FY23, plummeting to a meager 5.1 percent of the Gross Domestic Product (GDP). Concurrently, household indebtedness witnessed an alarming surge, more than doubling to Rs 15.6 lakh crore from FY21, driven predominantly by substantial borrowings from financial institutions, particularly for housing loans and other retail financial products, according to an in-depth analysis of the latest official data.
SBI Research reveals that a significant portion of the decline in savings was directed towards the acquisition of physical assets. Within the spectrum of the Rs 8.2 lakh crore surge in household indebtedness during FY23, a substantial Rs 7.1 lakh crore was attributed to bank borrowings, with a pronounced emphasis on home loans and various retail financing options.
In the same fiscal year, household savings experienced a dramatic slump, plummeting from 11.5 percent of GDP in FY21 to a historic low of 5.1 percent, marking a 50-year nadir. This descent persisted despite a relatively higher savings rate of 7.6 percent in FY20, a period that predates the onset of the pandemic. Notably, household savings have long served as a pivotal source of funding for the two deficit-prone sectors – government finances and non-financial corporations.
The household sector, encompassing individuals and a diverse range of non-government, non-corporate entities such as agricultural and non-agricultural businesses, unincorporated enterprises including sole proprietorships and partnerships, and non-profit institutions, bore the brunt of this fiscal turmoil.
According to Soumya Kanti Ghosh, the Group Chief Economic Adviser at the State Bank of India, financial liabilities escalated by an astounding Rs 8.2 lakh crore since the onset of the pandemic, surpassing the growth in gross financial savings amounting to Rs 6.7 lakh crore.
By PTI
