Recently updated national account statistics highlights many interesting and noteworthy trends relating to household economics, especially consumption, investments and savings at the household level. The data also highlights the impact of demonetization on the household economics that may be the key to the understanding of current economic slowdown.
Some of the noteworthy trends in household savings are as follows:
(a) Overall household savings have shown a declining tendency in past one decade. From a recent high of 24.3% of GDP in FY13, these have declined to 22.3% in FY18.
(b) Gross financial savings have recorded significant increase in the past few years. From 10.7% in FY12, gross financial savings had increased to 14.2% in FY18. The trend in Net Financial Savings has been little weak though, reflecting the rise in financial liabilities at household level, which have risen from 3.3% of GDP in FY12 to 5.6% of GDP in FY18.
This highlights two trends in my view:
(i) The financial inclusion has gathered pace with expansion of banking and non-banking financial institutions, especially micro finance lenders. The credit availability has increased and access to banking has improved financial savings.
(ii) There was a sharp fall of 1.5% in gross financial savings in FY17, with matching rise in physical savings. This appears to be due to demonetization.
(c) Financial liabilities in proportion to household savings have risen disproportionately post demonetization. From 14% in FY12, these were in excess of 25% in FY18.
(d) Savings invested in gold and silver jewelry had mostly remained constant around 0.4% of GDP. It has seen some decline in FY18 to 0.3%.
As proportion of gross household savings, deployment in gold & silver jewelry has declined to 1.88% in FY16 to 1.4% in FY18.Some more interesting trends are seen in the deployment of financial savings and household consumption patterns.
I shall be discussing these over next couple of days.