On Wednesday, the Reserve Bank of India released data on household savings for the third quarter of 2020-’21. This covered the October-Dece...
On Wednesday, the Reserve Bank of India released data on household savings for the third quarter of 2020-’21. This covered the October-December 2020 period, which means the data captured the aftermath of first Covid-19 wave in India and the economic disruptions that containment measures such as lockdowns caused.
The numbers are disappointing with a sharp dip in the net financial assets of households. Not only does this point to the economic hit the Indian middle class has taken but it is also bad news for India’s post-Covid economic recovery, given that it might mean reduced spending as well as a lower corpus available for investment.
Net financial assets have dropped
The RBI tracks both household assets and liabilities. Assets include items such as bank deposits, provident funds and mutual funds investments, among others. Liabilities, on the other hand, are loans that a household has taken.
Net assets therefore are total assets minus liabilities. Note that “household” here refers also to unregistered businesses whose assets and liabilities are not counted as part of private corporate data.
From the first quarter of 2020-’21 (April-June) to the third quarter (October-December), net financial assets dropped from 21% of India’s gross domestic product to just 8.2% after two consecutive quarters of decline. Total assets also...
