55% drop in household savings in FY23: SBI report

The net financial savings of households plunged by close to 55 per cent in FY23 to 5.1 per cent of GDP, and their indebtedness more than doubled to Rs15.6 lakh crore from FY21, primarily led by massive borrowings from banks, shows an analysis of latest official numbers. According to SBI Research, a good portion of the drawdown from savings have gone to physical assets and of the Rs8.2 lakh crore increase in household indebtedness in FY23, as much as Rs7.1 lakh crore accounted for bank borrowings, primarily for home loans and other retail finances. In FY23, household savings plunged to 5.1 per cent of GDP, from 11.5 per cent in FY21, a 50-year low, and 7.6 per cent in FY20, which was not the pandemic period.

It can be noted that the most important source of funds for the two deficit sectors -- general government finances and the non-financial corporations, are household savings. The household sector in the national accounts includes, apart from individuals, all non-government, non-corporate enterprises like farm and non-farm businesses, unincorporated establishments like sole proprietorships and partnerships and non-profit institutions.

According to Soumya Kanti Ghosh, the group chief economic adviser at the State Bank of India, financial liabilities jumped by Rs8.2 lakh crore since the pandemic, outpacing the increase in gross financial savings of Rs6.7 lakh crore.