With declining savings and a bleak earnings outlook, Indian households are pinning their hopes on the upcoming Budget 2024-25, to be presented by Finance Minister Nirmala Sitharaman. According to a survey conducted by LocalCircles, 48% of those surveyed believe their annual household earnings and average household savings will reduce in fiscal 2024-25 in comparison to fiscal year 2023-24.
At least 15% households are projecting an over 25% dip in savings this year while 7% of them are projecting a 25% or higher drop in household earnings. This is largely due to higher cost of living and other expenses, often resulting in asset mortgage or liquidation, borrowing for personal use apart from loans taken for buying a flat/ house/ vehicle or even education, revealed the survey.
The LocalCircles survey received over 21,000 responses from household consumers located in 327 districts of India. 67% respondents were men while 33% respondents were women.
With the Finance Minister presenting Budget 2024-25 next week, feedback from households indicates that many are hoping for some respite from this squeeze, be it reduction in income tax rates, expansion of income bracket that gets zero tax or increase of deduction limits under 80C.
Many have been writing about the rising costs related to food, school education, rent, transportation, cost of electricity, etc., the basic expenses incurred by a middle-class family. The big concern being a declining earnings scenario for many and the need to dip into savings, ancestral property/land or take loans, just to make ends meet.
Net household savings in India declined sharply by Rs 9 trillion to Rs 14.16 trillion in the three years to 2022- 23 (FY23). Overall, India’s household savings rate has fallen from 22.7% of GDP in FY21 to 18.4% in FY23, as per the National Account Statistics 2024 data released by the Ministry of Statistics and Programme Implementation (MoSPI).
Household savings had touched a peak of Rs 23.29 lakh crore in 2020-21, the year which saw the second wave of the Covid pandemic. Following that it has been on the decline. It then fell to Rs 17.12 lakh crore in 2021-22 and further to Rs; 14.16 lakh crore in 2022-23.
In the last decade, the growth rate of financial liabilities, at 16.1% year-on-year, has exceeded that of gross financial assets, which averaged 10.8% year-on-year. Notably, in FY2022-23, there was a significant surge in financial liabilities, rising by 76% year-on-year, leading to a considerable decline in net financial assets.
First Published: Jul 18 2024 | 4:29 PM IST
