Debt burden on Indian families increased in second quarter, savings fall: RBI

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RBI

Mumbai: During the one year of the Coronavirus Pandemic, the debt burden on Indian families has increased. According to the latest data from the Reserve Bank of India (RBI), the debt on households has increased to 37.1 percent of GDP in the second quarter of the current financial year. At the same time, the savings of the families have come down to 10.4 percent during this period.

Millions of people have become unemployed due to the epidemic, while large numbers of people have lost their salaries. Because of this people have had to take more loans or have to meet expenses from their savings. According to the data, the share of households in the total loan market in the second quarter increased by 1.30 percent to 51.5 percent on an annual basis.

Household savings reached 21 percent of GDP in the first quarter
According to the Reserve Bank’s March Bulletin, at the beginning of the epidemic, people were inclined towards saving. Because of this, the savings of households reached 21 percent of GDP in the first quarter of 2020-21, but in the second quarter it came down to 10.4 percent. However, this is higher than 9.8 percent in the second quarter of 2019-20.

RBI1

7.5% fall in GDP in the second quarter
Economists of the Reserve Bank say that in general, when the economy stagnates or declines, the savings of families increase. At the same time, when the economy improves, the savings decrease, because the confidence of people to spend increases. In this case, the savings of households reached 21 percent of GDP in the first quarter. At that time, there was a 23.9 percent decline in GDP. After that, the fall of GDP in the second quarter was reduced to 7.5 percent. At the same time, people’s savings came down to 10.4 percent.

The Reserve Bank said that a similar trend was seen during the global financial crisis in 2008-09 as well. At that time, household savings had risen to 1.70 percent of GDP. Later, with the improvement in the economy, savings also began to decrease.

https://rbidocs.rbi.org.in/rdocs/PressRelease/PDFs/PR1272D17AF05EB1BD4D5088228FDAF4CA253C.PDF

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