Indian Economy- Saving based on Household savings.
The release of the RBI Monthly Bulletin in September revealed that households’ net financial savings had fallen to 5.1% from 11.5% in 2020-21.
Financial liabilities of households rose faster than their assets
This trend as an indication of rising indebtedness and increasing distress.
The growing household loans from SCBs are by 17% and 25% for education and vehicles respectively in 2021 – 2022.
The government counter claims this with , household financial savings may be reducing, i did not imply total savings were falling.
Households took advantage of low interest rates after the pandemic to invest in assets such as vehicles, education and homes.
The optimistic claims in savings
There is evidence to support the government’s narrative of a shift from financial to physical assets.
Between 2020-21 and 2021-22, the construction sector was the fastest growing sector, growing at nearly 15% compared to2011-12 prices.
Liabilities in other non-financial assets have also increased.
Education and vehicle loans from SCBs increased.
Households are taking advantage of the low interest rates set by the RBI after pandemic.
The pessimistic claims in savings
The fall in household net financial savings was driven largely by a rise in liabilities.
Gross financial assets declined marginally as a share of GDP between 2021-22 and 2022-23 from 11.1% to 10.9%
Gross liabilities, remaining steady at roughly 3.8% of GDP
Outstanding credit card loans increased from 3.8% to 4.7% over this period
loans against gold jewellery rising from 1.07% to 2.16%.
Households taking on credit card debt and taking loans against jewellery to finance consumption.
The pessimistic claims in savings
Loans from non-banking institutions, which grew by almost ten times in just the last year, contributing to 32.1% of the total rise in financial liabilities over this period.
COMMENTS