MUMBAI: Rising income levels are driving a revival in household savings, which had been on a declining trend for several years, according to Reserve Bank of India (RBI) Deputy Governor Michael D. Patra.
He emphasised that India must accelerate growth and develop world-class physical infrastructure over the next decade to meet its national development goals.
Speaking at a finance summit organized by the Confederation of Indian Industry (CII) in Mumbai, Patra highlighted that household savings have increased from an average of 10.6% of GDP during 2011-2017 to 11.5% during 2017-2023, excluding the pandemic year.
He noted that this revival in savings is being driven by rising incomes, which are expected to continue fueling the rebuilding of financial assets by households.
“From a time-varying perspective, a burst of speed is required for just about a decade; thereafter, sheer momentum will propel us forward even at lower growth rates. On the way, we will need to build up world-class physical infrastructure and a conducive environment for unleashing innovation energies while moving towards being a greener, cleaner, and healthier nation,” Patra said.
He explained that the decline in savings levels in recent years was due to behavioral changes, including the unwinding of prudential savings accumulated during the pandemic and a shift from financial assets to physical assets, such as housing. “With rising incomes, households are expected to rebuild their financial assets,” Patra added.
In fiscal year 2024, household savings hit a five-year low of 5.2% of GDP. Patra acknowledged that net household savings had almost halved as a proportion of national GDP, but attributed this to the behavioral shifts mentioned earlier.
+ There are no comments
Add yours