Households’ debt surged to new high by Dec. 2023

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Last Updated10/04/2024

In what may be construed as a sign of rising financial distress, India’s household debt levels are reckoned to have touched an all-time high of 40% of Gross Domestic Product (GDP) by December 2023.
Net financial savings had likely dropped to their lowest level at around 5% of GDP, as per a research report from leading financial services firm Motilal Oswal.

In September 2023, the Reserve Bank of India (RBI) estimated that households’ net financial savings had dropped to 5.1% of GDP in 2022-23, a 47-year low
It had argued that households are adding fewer financial assets than in the past because they were taking loans to buy real assets such as homes and vehicles
- Which is “not a sign of distress but of confidence in their future employment and income prospects”.
The first revised estimates of national income for 2022-23 published this February, raised the estimated net financial savings in households to 5.3% of GDP
- Which is still the lowest in 47 years, and weaker than the average of 7.6% of GDP recorded between 2011-12 and 2019-20.
The report ascribed the dismal 2022-23 net financial savings numbers to weak income growth, robust consumption and growth in physical savings.