Household savings now at lowest in decades: RBI
₹13.8 trillion, compared to ₹17 trillion in 2021-22. During the same period, gross financial assets of households grew 14% from a year ago to reach ₹29.6 trillion. However, the financial liabilities witnessed a substantial 76% growth during the period, outpacing the growth in assets.
The trend resulted in a decrease in net financial savings as a percentage of GDP. India’s retail inflation, as measured by the consumer price index (CPI), came in at 6.83% in August, surpassing RBI’s flexible inflation target of 2-6% for two consecutive months. In its August monetary policy, RBI projected CPI inflation to hover at 5.4% for 2023-24.
In FY23, retail inflation stood at 6.7%. Robust credit growth to retail borrowers has resulted in a 57% year-on-year increase in household bank borrowings, while deposits witnessed 32% rise. In FY23, retail loans surged 21%, significantly higher than the 13% growth in FY22.
Banks’ retail loan growth, driven by growing demand for mortgages, has been a key driver for credit expansion in recent years, compensating for the sluggish demand for corporate loans. This trend persists despite RBI raising the repo rates by 250 basis points between May 2022 and February 2023. “I believe a decline in gross financial savings is more worrisome than the net number as it shows that you are saving less and consuming more," said Sabnavis.
Private final consumption, a key consumption indicator, improved in the recent quarter. This metric is defined as spending by resident households and non-profit institutions serving households on the final consumption of goods and services. According to a report by SBI Caps, private final consumption expenditure increased by 6% in Q1 of FY24, up from the 2.8% growth in the previous
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