Household Savings Likely Revived in FY24: Crisil
New Delhi: Household Savings likely revived in FY24 after falling to their lowest level in FY23, ratings agency Crisil said in a report released Tuesday.
“Amid low CAD, increasing domestic savings are likely to have financed rising investments in the economy. We estimate that total domestic savings are likely to have financed rising investments in the economy. We estimate that total domestic savings likely grew stronger in fiscal 2024, compare with 10.7% on year in the previous fiscal,” the ratings agency said.
India’s current account deficit likely narrowed to around 1% of GDP in FY24.
Crisil further pointed out that some of the high frequency data also indicated a rise in savings from households,
“Bank deposits, which constitute the largest chunk of gross financial savings, grew 13.5% in FY2024, compared with 9.6% in the previous year”, it said. Moreover, Crisil noted that mutual fund investments rose further in FY24, and even continued rise in equity market returns may have attracted more retail investors. Net inflows in mutual funds rose to Rs 2 lakh crore in FY24 compared with Rs 1.55 lakh crore in FY23.
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Meanwhile, the growth of bank credit slowed during this period. Rising financial liabilities was one of the reasons for net savings to decline to its lowest level in decades in FY23. Government data released earlier this month showed that net financial savings declined to 5.3% of GDP in FY23 – the lowest in nearly five decades – as household liabilities nearly doubled from previous year. Crisil further noted that a rise in residential sales and a slowdown in private consumption also indicates a move towards household sayings.
“Crisil MI&A Research finds that for a sample of the top 10 cities, retail residential rent estate sales grew 9% between fiscals 2023 and 2022 and picked up to – 20% on average during FY23 and FY24,” it said.
Earlier this month, chief economic advisor V Ananth Nageswaran dismissed concerns pointing out that the households were running down savings to accumulate financial assets. The transmission of rate hikes may also spur household savings going forward, the rating agency highlighted, noting that falling inflation will also contribute as a factor.
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