Michael Patra, Deputy Governor of the Reserve Bank of India (RBI), underscored a rise in absolute financial savings in India by 14% for 2023. However, he also brought to light a historical low in net financial savings, which stood at 5.1% of GDP during the fiscal year 2023 (FY23).
This development comes as households are increasingly shifting their focus from financial to physical savings, with housing being the primary target. This shift is expected to stimulate an increase in investment over the next year.
The transition towards physical savings has not been without its challenges. It has coincided with a surge in household debt and the overall stock of financial liabilities. The latter rose to 37.6% of GDP, up from 36.9% in the previous fiscal year (FY22).
In addition, annual financial liabilities have also seen a significant increase, reaching 5.8% of GDP in FY23. On the other hand, net household assets have experienced a drastic fall, dropping from Rs 22.8 trillion in FY21 down to Rs 13.76 trillion in FY23.
These changes indicate a significant shift in the financial behavior of Indian households, reflecting a preference for physical assets over financial ones and an increased willingness to take on debt. The full implications of these trends will continue to unfold in the coming years.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.
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