Net financial saving of households has almost halved from its level in 2020-21 due to behavioural changes underway in the form of unwinding of prudential savings accumulated during the pandemic as well as shifts from financial assets to physical assets such as housing, Reserve Bank Deputy Governor Michael Debabrata Patra said on Tuesday. Going forward, boosted by rising incomes, households will likely build back their financial assets 15 per cent of GDP was observed during the early 2000s up to the global financial crisis. This process has already begun households financial assets have increased from 10.6 per cent of GDP during 2011-17 to 11.5 per cent during 2017-23 (excluding the pandemic year). Their physical savings have also risen in the post-pandemic years to over 12 per cent of GDP and could rise further they had reached 16 per cent of GDP in 2010-11. Accordingly, households will remain the top net lenders to the rest of the economy in the coming decades.
The private corporate sector has drastically reduced its net borrowings from the rest of the economy, reflecting a combination of rising internal accruals and subdued capacity creation. Looking ahead, its net borrowing requirement is likely to rise on the back of a revival in the capex cycle. These financing requirements will largely be met by households and external resources. Net dissaving of the public sector has been moderating albeit unevenly; this sector will remain a net borrower in the economy in view of the critical role envisaged for fiscal policy in shaping Indias future.
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