Household savings likely to increase in FY2024, CRISIL reveals in report

A branch of the domestic rating agency said on Tuesday that household savings are likely to increase in the financial year 2023-24. CRISIL Market Intelligence and Analytics said there are early indicators that show that household savings will improve in FY24, while the growth in household liabilities will slow.

"Proxy data indicates a rebound in the overall savings rate in FY24, led by households," it said in a note. Also said that domestic savings constitute 60 percent of the total savings in the economy. It is worth noting that official data released last year showed a dramatic decline in India's net financial domestic savings rate from 7.3 percent in FY22 to a 47-year low of 5.3 percent.

The CRISIL report notes that since the pandemic, households have been borrowing faster than they are saving, leading to a decline in net household financial savings, obtained by adjusting financial savings for liabilities.

The report said the propensity to take loans among households has increased due to factors such as the promotion of retail credit by banks and increased willingness to borrow. Additionally, household savings in physical assets have also increased following the pandemic.

The report said the slowdown in private consumption in FY24 despite GDP growth also indicates rising savings of households. Additionally, there is also a case for higher savings in the overall economy, it said, pointing to a trend of reduction in the current account deficit by 1 percent and an increase in investment from 32.2 percent to 33.7 percent of GDP in FY23. Has gone.

Rising domestic savings amid low CAD are likely to finance rising investment in the economy. “Early indicators suggest growth in aggregate household savings is likely to have contributed to the increase in aggregate savings in FY24,” it said, adding that the trend will be clear when the RBI releases data in September 2024.