India’s Household Savings Likely Rose After 2 Years of Declines

Net financial savings of households increased to about 6% of gross domestic product in the fiscal year that just ended, Goldman Sachs economists led by Santanu Sengupta wrote in a report this week. The ratio had declined to a 18-year low of 5.1% in the previous financial year, it said.

In a separate report, Crisil Ltd., the domestic arm of S&P Global, said overall household savings may have picked up too, both in physical and financial assets. 

Indians have traditionally saved a significant portion in physical assets, mainly in real estate. During 2010-2020, savings in physical assets were on average 12.8% of GDP, making up 61% of household savings, while net financial savings were 8.1% of GDP. 

There has since been “an ongoing trend of financialization of household savings,” the Goldman economists said. Real estate still dominates investment decisions but the share of bank deposits in financial assets has declined to about 35% on average in 2016-2023 from about 50% in 2005-2015, they said.

India’s average gross savings rate — which includes savings of households, businesses and the government — was an average of 31% of GDP in the past 10 years, which is “healthy” and “higher than the global average of around 26.5%,” the economists said. However, the ratio still lags Asian emerging markets such as China, Taiwan and Korea, they said.

Crisil’s report echoed Goldman’s views on savings.

“Early indicators show that household savings may have revived in fiscal 2024 while growth in household liabilities could have likely moderated,” Crisil analysts said in a report. 

Both the firms pointed to a rise in bank deposits, mutual funds, and retail residential real estate in the past year to show a rise in overall savings.

“Boosting domestic financial savings will help fund the capital expenditure cycle without widening the current account deficit materially or increasing external vulnerability,” Goldman said in its report.

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