In what may be construed as a sign of rising financial distress, India’s household debt levels are reckoned to have touched an all-time high of 40% of Gross Domestic Product (GDP) by December 2023, while net financial savings had likely dropped to their lowest level at around 5% of GDP, as per a research report from leading financial services firm Motilal Oswal.
In September 2023, the Reserve Bank of India (RBI) had estimated that households’ net financial savings had dropped to 5.1% of GDP in 2022-23, a 47-year low, triggering a flurry of criticism that the Finance Ministry had refuted sharply. It had argued that households are adding fewer financial assets than in the past because they were taking loans to buy real assets such as homes and vehicles which is “not a sign of distress but of confidence in their future employment and income prospects”.
The first revised estimates of national income for 2022-23 published this February, raised the estimated net financial savings in households to 5.3% of GDP, which is still the lowest in 47 years, and weaker than the average of 7.6% of GDP recorded between 2011-12 and 2019-20. The revised estimates also scaled up household debt levels to 38% of GDP in 2022-23, second only to the 39.1% of GDP recorded in the pandemic-hit year of 2020-21.
