New Delhi, May 22 (KNN) According to a report released on Tuesday by Crisil, a prominent rating agency, India's household savings, which had been declining since the COVID-19 pandemic due to higher borrowings, may have rebounded in the fiscal year 2023-24 (FY24).

While official data from the National Statistical Office (NSO) is still awaited, early indicators suggest that household savings may have revived in FY24, and the growth in household liabilities is likely to have moderated, as stated by Crisil.

The report, titled ‘Trends in Household Savings and Debt After the Pandemic,’ notes that India's current account deficit (CAD) is estimated to have narrowed to around 1 per cent of GDP in FY24, down from 2 per cent in the previous fiscal year.

However, investments rose to about 33.7 per cent of GDP from 32.2 per cent in the preceding 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," the report states.

Crisil highlights that bank deposits, which constitute the largest portion of gross financial savings, grew 13.5 per cent in FY24, compared with 9.6 per cent in the previous year, outpacing the 9.1 per cent nominal GDP growth in FY24.

Additionally, mutual fund investments by households grew at a faster rate in FY24 compared to recent years, with investments through systematic investment plans (SIPs), primarily opted for by individuals, continuing to rise.

While bank retail credit growth remained relatively high at 17.7 per cent in FY24, down from 21 per cent in FY23, the report states that Indian households continued to invest in real estate during the fiscal year.

Furthermore, a slowdown in private consumption during FY24, despite high GDP growth, hinted at increased household savings.

"Early indicators are that overall household savings likely rose and contributed to higher total savings in fiscal year 2024," the report concludes.

However, the report also notes that expectations of rate cuts have been pushed ahead amid inflation risks and buoyant growth, and further transmission of the Reserve Bank of India's past rate hikes could encourage households to increase their savings.

According to the latest data from the Ministry of Statistics, net household savings declined sharply by Rs 9 trillion to Rs 14.16 trillion in the three years to FY23, with India's overall household savings rate falling from 22.7 per cent of GDP in FY21 to 18.4 per cent in FY23.

(KNN Bureau)