Revival in Household Savings Likely in FY24, Says Crisil

Mumbai: High inflows in mutual funds and real estate, strong deposit growth, and slower consumption are pointing towards a rebound in India’s household savings in FY 24 after falling to its lowest level in FY23, rating agency Crisil Ltd said in its report, titled 'Trends in household savings and debt after the pandemic'.

According to the latest data from the Ministry of Statistics, net household savings declined sharply by Rs 9 lakh crore to Rs 14.16 lakh crore in the three years to FY23. Overall, India’s household savings rate has fallen from 22.7 per cent of GDP in FY21 to its lowest level of 18.4 per cent in FY23.

While official data from the National Statistical Office (NSO) is still awaited, early indicators show that household savings may have

revived in FY24 while growth in household liabilities could have likely moderated, the rating agency said.

India’s current account deficit (CAD) is estimated to have narrowed to about one percent of GDP in fiscal year 2024 from 2 per cent in the previous year. But investments rose to about 33.7 per cent of GDP from 32.2 per cent of GDP in the previous year. “Amid low CAD, increasing domestic savings are likely to have financed rising investments in the economy. We estimate that total domestic savings likely grew stronger in fiscal 2024, compared with 10.7 per cent on-year in the previous fiscal," it added. A current account deficit occurs when the total value of goods and services a country imports exceeds the total value of goods and services it exports.

Similarly, bank deposits, which constitute the largest chunk of gross financial savings, grew 13.5 per cent in fiscal year 2024, compared with 9.6 per cent in the previous year. The latest fiscal saw net mutual fund inflows through the Systematic Investment Plans route touch nearly Rs 2 lakh crore compared with Rs 1.55 lakh crore in fiscal 2023 and just over Rs one lakh crore in fiscal 2020. The

continued rise in equity market returns in fiscal 2024 also attracted retail investors. Bank retail credit growth remained relatively high at 17.7 per cent in FY24, though down from 21 per cent in FY23, it added.