Across the country, net saving has fallen and public spending has risen. The Reserve Bank of India’s Financial Stability Report-2024 shows that people’s net savings have declined. On the other hand, the saving behavior of people has also changed due to Corona. According to the report, there are two main reasons for the decline in savings. Firstly, people are now investing in gold and silver, land, houses and mutual funds, secondly, household expenditure of people has increased, which has reduced net financial savings.
India’s gross savings rate was 29.7 percent in FY 2022-23. In which the share of the primary saver of the family has been 60.9 percent in the year 2022-23. While the average between 2013-22 was 63.9 percent. Similarly, the net financial savings of the people has declined by 11.3 per cent to 28.9 per cent in 2022-23. While the 10-year average has been 39.8 percent.
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Net fiscal savings have declined due to the continued rise in fiscal expenditure. People are spending more to meet their household needs. Hence the share of savings in GDP has decreased. If viewed in terms of a 10-year average, the share of net savings in GDP has declined by 2.7 percent. It has come down from eight per cent a decade ago to 5.3 per cent in 2022-23.
Savings increased during the Corona period
During the corona epidemic, the financial savings of the household increased. During this period, total household savings reached 51.7 percent, but as soon as the lockdown was lifted, people started spending their savings on property purchases. On the other hand, people’s financial liabilities also increased after Corona, due to which people’s net savings in the form of cash is continuously decreasing.
The tendency to take loans increased
Since Corona, people are avoiding keeping their net savings in bank accounts in FD and other forms. Also, they do not avoid taking loans to buy property. This is the reason why agricultural and commercial loans have increased. Domestic borrowing has reached 40 percent of India’s GDP, more than Indonesia, Mexico, Poland and Brazil among the world’s emerging economies.
People are getting good returns from stock market
Reports show that people are getting good returns from the stock market which is much higher than the interest offered by any bank and non-banking financial companies. Banks typically earn seven to eight percent annual returns, but investors in the stock market have seen strong returns. So, people are investing in risky stock market instead of keeping their savings in banks.