New Delhi: The gross financial savings of Indian families declined to 7.6 per cent of the gross national disposable income (GNDI) in the financial year ended in March 2022. During the Covid period, financial year 2020-21, the gross financial saving of an Indian household was in double digits at 11.3 per cent of the GNDI.
The gross financial savings of Indian families include currency in hand, deposits in banks and other financial institutions, investments in shares and debentures, insurance funds, investments and deposits in provident fund and pensions funds and claims on the government. The gross financial savings of Indian households are the two most important sources of funds for the two deficit sectors, mainly the general government sector and non-financial corporations.
Gross financial savings of Indian families have been estimated at Rs 22.6 lakh crore in FY 2018-19, it marginally increased to Rs 23.3 lakh crore in the next financial year. During the Covid period, gross financial savings of Indian families were at their peak in recent years as people curtailed their expenditures due to the uncertainty caused by the global pandemic.
As a result, gross family savings of Indian families increased to Rs 30.6 lakh crore during the financial year 2020-21, when the country was either under complete or partial lockdown throughout the year to contain the community spread of the virus. However, as the clouds of Covid induced uncertainty abated and cash flow of Indian families improved, the saving behaviour of Indian families changed and the gross financial saving declined to Rs 26 lakh crore, a decline of 3.7 percent.
Saving behaviour of Indian families
While currency reserves with Indian households declined from Rs 3.8 lakh crore in FY 2020-21 to Rs 2.6 lakh crore in FY 2021-22, the biggest decline was recorded in the deposits held by Indian families.
Deposits declined from a record Rs 12.5 lakh crore in FY 2020-21 to Rs 8.3 lakh crore, a sharp decline of 4.2 lakh crore as shares of deposits in the saving of Indian families, as a percentage of gross national disposable income (GNDI) declined from 6.2 percent to 3.5 percent.
On the other hand, the investment by Indian households in shares and debentures, rose from Rs 1 lakh crore in FY 2020-21 to Rs 2.1 lakh crore. During the same period, the claims of Indian families to the government increased from Rs 2.6 lakh crore to Rs 2.8 lakh crore. Similarly, the financial savings of Indian families parked in provident funds and pension funds recorded marginal increase during the same period while their savings parked in insurance funds declined marginally.
Savings in these pension funds, provident funds and pension funds are the two biggest sources of household financial savings after deposits. While savings of Indian households parked in insurance funds declined from 5.6 lakh crore to 4.5 lakh crore during the same period, the savings parked in pension and provident funds increased from 4.8 lakh crore to 5.7 lakh crore.
Liabilities of Indian families
Financial liabilities of Indian families which have been range bound between Rs 7.7 lakh crore to Rs 7.8 lakh crore during the FY 2018-19 to FY 2020-21, increased to Rs 8 lakh crore in FY 2021-22. As per the provision data for the last financial year (April 2022 to March 2023), financial liabilities of Indian families are set to rise to Rs 8.6 lakh crore.
