Household savings likely to rise in FY24, liabilities to moderate: CRISIL

Household savings are likely to rise in fiscal 2023-24, an arm of a domestic rating agency said on Tuesday.

Crisil Market Intelligence and Analytics said there are "early indicators", which show that household savings would have revived in FY24, while growth in household liabilities would have moderated.

"Proxy data suggest a rebound in the overall savings rate in FY24, with contribution from households," it said in a note, adding that household savings constitute 60 per cent of the total savings in the economy.

It can be noted that official data released last year showed a dramatic fall in India's net financial household savings rate to a 47-year-low of 5.3 per cent from 7.3 per cent in FY22.

 

The Crisil report explained that households have been borrowing at a faster pace than they have been saving since the pandemic, due to which the net household financial savings, which was arrived at by adjusting financial savings for liabilities.
 

Factors like retail credit push by banks and a greater appetite for borrowings have resulted in a rising proclivity for debt among the households, it said, adding that the household savings in physical assets have also risen post-pandemic.

On its view of an improvement in household savings in FY24, the report pointed to what it called proxies like a rise in the bank's deposits growth to 13.5 per cent in FY24 from the 9.6 per cent in the year-ago period and the jump in mutual fund investments as seen in the monthly numbers.

It also pointed to a moderation in retail credit growth among banks to 17.7 per cent from 21 per cent in FY23 and the trend of higher investments into real estate continuing.

The slowdown in private consumption in FY24 despite GDP growth also hints at households' rising savings, it said.

Additionally, there is also a case for higher savings in the overall economy, it said, pointing to the trend of narrowing the current account deficit to 1 per cent and an uptick in investments to 33.7 per cent of GDP from 32.2 per cent in FY23.

Amid low CAD, increasing domestic savings are likely to have financed rising investments in the economy, it added.

"Net-net, early indicators are overall household savings likely rose and contributed to higher total savings in FY24," it said, adding that the trend will be clear when the RBI releases the data in September 2024.