Chart Beat: Household net savings seen under pressure in FY24 as debt swells
Household debt is on the rise. According to an analysis by Motilal Oswal Financial Services, household debt as a percentage of gross domestic product (GDP) touched a new high of about 40% in the December quarter (Q3FY24).
The metric grew for the sixth consecutive quarter in Q3. Within the realm of household debt, unsecured personal loans have grown the fastest, followed by secured debt, agricultural loans and business loans, shows the analysis.
The trend poses a potential risk to household net financial savings (HHNFS), which is determined by the balance between household gross financial savings and financial liabilities. “Our estimates suggest that HHNFS was broadly unchanged at about 5% of GDP in the nine months ended December, and it is very likely that it could be between 5% and 5.5% of GDP in FY24," said the Motilal Oswal report on 19 March.
In FY23, household net financial savings as a percentage of GDP was at a multi-year low of 5.3%. Note that household net financial savings are crucial for funding the fiscal deficit.
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