Decline in savings of Indian households – Careers Ready


According to the recent data of Reserve Bank of India, India's net domestic savings have reached their lowest level in 47 years.

Gross Domestic Product (GDP)

  • It is the state of a country during a specified time period, usually a year. The market value of all goods and services produced within the domestic sector.

related facts

  • Reduction in Savings: Savings will reduce GDP in financial year 2023 (GDP) increased to 5.3%, which was 7.3% in the year 2022.
  • Increase in household credit: There has also been a sharp increase in domestic debt during the same period.
    • Annual borrowing 5.8% of GDP That is, the second highest level since the 1970s.
    • A significant portion of India's growing domestic debt non-mortgage loans Made from. More than half of these loans include agricultural and commercial loans.
  • Debt Service Ratio: Indian families The debt service ratio is around 12%, similar to the Nordic countries.
  • this ratio More than China, France, UK and America, Household debt levels are high in all of them.
    • This difference is due to higher interest rates and shorter loan tenure in India, resulting in a relatively higher DSR despite a lower debt-to-income ratio.
    • DSR is that part of the incomewhich is used to repay the loan.

What is Household Net Savings?

  • Household Net Savings: household net savings is the total wealth and investments that households have, As Deposits, Stocks and Bonuses, Loans and Credit Like minus any money they owe you.
  • Reasons behind reduction in savings: As households become more dependent on borrowing to maintain consumption, their savings naturally decline.
    • With increasing borrowing, A large portion of their income is allocated towards loan repayment, resulting in reduced savings.
  • However, in situations like credit cards, consumer goods, weddings and health emergencies, Borrowing for consumption purposes is less than 20% of total household debt, it Represents the fastest growing segment.
  • Change from 'Credit Widening' to 'Credit Deepening': The primary driver of household credit growth in the last decade''Credit Widening' instead of 'Credit Deepening' Used to be.
  • 'Credit Extension' The opposite of credit intensification is characterized by expansion in the number of borrowers, which involves each borrower taking out larger loans.
  • Compared to individual borrowers taking larger loan amounts Increasing the number of borrowers is considered more favourable.

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