Household savings witness sharp decline to a 5-year-low

Household Savings Dips: According to the latest National Account Statistics 2024 released by the Ministry of Statistics and Programme Implementation, net household savings in India experienced a significant drop of Rs 9 lakh crore over three years, plummeting to Rs 14.16 lakh crore in the fiscal year 2022-23. Currently, as a percentage of GDP, household financial savings stand at 5.3 per cent, the lowest in the last 5 years, as the financial savings hovered around 7-8 per cent between FY12-FY22. 

The data reveals a stark contrast from the peak of Rs 23.29 lakh crore in 2020-21, signalling a steady decline in household savings over subsequent years.

In a five-year low, net household savings hit Rs 14.16 lakh crore in 2022-23, down from Rs 17.12 lakh crore in the previous fiscal year and marking a noticeable dip from Rs 13.05 lakh crore recorded in 2017-18.

Despite this overall decline, the investment witnessed notable shifts. Investment in mutual funds nearly tripled to Rs 1.79 lakh crore in 2022-23 from Rs 64,084 crore in 2020-21, and household investment in shares and debentures almost doubled to Rs 2.06 lakh crore over the same period.

Bank advances to households also surged, doubling to Rs 11.88 lakh crore in 2022-23 from Rs 6.05 lakh crore in 2020-21. Similarly, loans to households from financial and non-banking financial corporations witnessed a substantial increase, quadrupling to Rs 3.33 lakh crore from Rs 93,723 crore in 2020-21.

These figures underscore a significant shift in household investment patterns, with a notable increase in mutual fund and stock investments alongside a surge in bank advances and loans from financial institutions.