Indian households' net financial savings falls to 5.1% in FY23 from 11.5% in FY21 as liabilities rise
Indian households’ net financial savings fell as much as four percentage points in the past two years as they ploughed it to build real assets such as homes and vehicles. While that has raised the indebtedness of people, economists say their ability to service debt is high compared with many major economies.
Official data on household net financial savings indicates that it fell to 5.1 per cent of GDP in 2022-23 from 11.5 per cent in 2020-21, well below its long-run annual average of 7.0-7.5 per cent.
This fall was driven by a rapid rise in financial liabilities ( borrowings by households) from 3.8 per cent of GDP in 2021-22 to 5.8 per cent in 2022-23.
Since a large part of the liabilities was used in funding in physical assets creation -mortgages and vehicles- the overall savings of households may still hold steady with a compositional shift in favour of physical savings a recent analysis by the Reserve Bank said.
But comparing data from the Bank for International Settlements and RBI's own estimate on India's debt service ratio, India’s household debt service ratio is one of the lowest compared to many major economies.
