Ira Singh
Khabar Khabaron Ki,10 May’24
As the specter of inflation looms large and borrowing costs escalate,households across the nation are grappling with a daunting reality: dwindling savings amidst a surge in home, auto, and personal loans. Recently in the report related to the declining trend in household savings published by the National Account Statistics 2024 has raised concerns about the far-reaching implications that this trend could have for the economy, potentially dampening consumer spending and curtailing investment.
The net household savings declined sharply by Rs 9 lakh crore to Rs 14.16 lakh crore in three years to 2022-23, as per the National Account Statistics 2024 data released by the Ministry of Statistics and Programme Implementation (MoSPI).
Explaining the data, ICRA Chief Economist Aditi Nayar attributed the declining trend in household savings to a sharp 73 per cent year-on-year increase in liabilities during 2022-23. She further stated that as per the indication the trend of decrease in household savings has continued in 2023-24, the data for which is likely to be released later.
However, the trend could reverse in 2024-25 as Reserve Bank of India (RBI) has taken measures to curb unsecured personal loans,Nayar reportedly quoted as saying.
Chief Economic Advisor V Anantha Nageswaran attributed the decline to a shift in portfolio where savings were being channelised to real assets. “Household net financial savings flows were lower in FY23 and there were some concerns around that, which said households are saving less. But, in reality, it was a portfolio shift where the savings were going into real assets,” Nageswaran had said at a NCAER event on Wednesday.
Economists caution that the decline in household savings could have ripple effects across the economy, dampening consumer demand and constraining investment. With savings serving as a vital source of funds for investment in productive assets and future consumption, a sustained erosion could undermine long-term economic growth prospects.
As stakeholders grapple with the implications of this alarming trend, there is a growing recognition of the need for concerted action to reverse the decline in household savings and fortify the economic resilience of households. From targeted policy interventions to public awareness campaigns, addressing this issue demands a coordinated effort to safeguard the financial well-being of individuals and bolster the foundations of economic prosperity.
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