Indian households saving more or just drowning in debt?
Motilal Oswal Financial Services report estimates net household financial savings rose to 7.3% of GDP in the first half of the 2024-25 financial year (FY25). This is nearly double the 3.7% recorded during the same period the previous year (FY24). Improved savings allow the government and businesses to tap into local funds for investments, boosting the economy.
Budget with ET
Before budget, a few positives blink on Sitharaman's dashboard
Will Sitharaman make roti, kapada, makaan affordable again?
Rail Budget may see up to 20% hike, focus on station upgrades & modern trains
The Reserve Bank of India (RBI) recently reported that net household financial savings slightly increased to 5.3% of GDP in FY24, up from a 47-year low of 5% in FY23. This follows a sharp decline from the peak of 51.7% during the Covid pandemic to 36.1% in FY22 and 28.5% in FY23.
The increase in savings is partly due to a drop in household liabilities, like personal loans, which fell to 4.7% of GDP in the first half of FY25 from 6.9% during the same period in FY24. RBI's stricter lending rules for personal loans, gold loans, and loans to non-banking financial companies (NBFCs) contributed to this decline.
While gross financial savings (total savings before subtracting liabilities) increased to 11.6% of GDP in FY24, rising liabilities limited the overall net savings growth. Household liabilities hit a 17-year high of 6.4% of GDP in FY24, just below the 6.6% record in FY07. Increased savings in insurance, reduced cash holdings, and higher capital
