Savings for growth

Low household savings can create risks

The latest numbers on household financial savings, released by the Reserve Bank of India (RBI) this week, have taken economists by surprise and can have significant implications for medium-term growth outcomes. The data revealed that the flow of net household financial savings dropped to a multi-decade low of 5.1 per cent of gross domestic product (GDP) in 2022-23, compared with 7.2 per cent the previous year. There could be multiple reasons for such a decline in financial savings. Since savings have declined even in absolute terms, it is possible that households that suffered income setbacks during the pandemic have not