There was a tendency on the part of households to increase precautionary or forced savings as people were forced to remain indoors for most part of the year due to nationwide lockdowns imposed to curb the spread of Covid-19 .
Uncertainty regarding future income, risk of unemployment caused by sudden outbreak of the pandemic withheld people from spending a large share of their normal expenditure basket.
In the previous fiscal year 2019-20, household savings rose by a mere Rs 1.35 lakh crore. However, financial liabilities had jumped by Rs 15,374 crore.
For the year 2020-21, total financial liabilities increased by only Rs 18,669 crore to Rs 8.05 lakh crore.
In the last 2 financial years, the cumulative gross financial savings increased by Rs 8.5 lakh crore, while financial liabilities increased by only Rs 34,000 crore.
Where is money being spent
Data analysed by the SBI report clearly shows that gold and silver ornaments as a saving instrument have become less popular among people. Money parked in these assets declined from Rs 46,469 crore in 2015-16 to Rs 38,444 crore in FY21.
Physical assets have become less popular avenues of saving and investing money. This indicates a behavioural change among those who go for savings.
Financial assets have been the preferred and trusted choice for people to invest their money.
The Economic Survey 2021, released by the government on January 31, also showed that people have been putting more money in capital markets.
As the stock markets continue with buoyant trend, participation by individual investors in equity cash segment has increased. Share of individual investors in total turnover at NSE increased from 38.8 per cent in 2019-20 to 44.7 per cent in April-October 2021.
The substantial increase in share of individual investors in 2020-21 and 2021-22 can partly be ascribed to the increase in new investor registrations witnessed since February 2020, the survey said.
In April-November 2021, nearly 221 lakh individual demat accounts were added.
Markets also witnessed a boom in fundraising through initial public offering (IPO) as many new age companies got listed. Majority of these IPOs witnessed stellar response from investors.
In April-November 2021, Rs 89,066 crore were raised via 75 IPO issues, much higher than in any year in the last decade.
Both sensex and Nifty have witnessed stellar gains ever since its pandemic induced fall in March 2020. Markets have outperformed global peers.
Sensex has jumped over 120 per cent from its lowest point on March 23, 2020. Since then, the 30-share index has scaled multiple peaks and breached the 62,000-mark (intra day) as well. At present, sensex is hovering over 59,000 mark.
Similarly, the broader NSE Nifty has also surged over 130 per cent from pandemic lows.
Investors have made stellar gains ever since. The market capitalisation of BSE listed companies had plunged to Rs 101 lakh crore on March 23, 2020 when markets crashed. In comparison, BSE mcap today stands at over Rs 268 lakh crore. That’s a jump of nearly 164 per cent in investor’s wealth.
Now, if we look at the returns generated by gold, silver it will be clear why people have shifted to capital markets.
At Rs 47,895 per 10 grams as of December 30, gold prices fell 4.2 per cent during the calendar year. A year ago, that is on December 30, 2020, 10 gm gold costed Rs 50,005.
The price of yellow metal rallied nearly 30 per cent in 2020 but prices fell in 2021 mainly on account of stronger US dollar. Silver too took a hit amid increased volatility in industrial metals.
Household debt to GDP ratio lower than others
To calculate household debt as percentage of GDP, the SBI report has considered retail loans, crop loans and business loans from financial institutions, namely commercial banks, credit societies, NBFCs, HFCs and more.
The estimated debt has increased sharply to 37.3 per cent in 2020-21 from 32.5 per cent in 2019-20 (BIS estimates are at 37.7 per cent as on December 20) but declined to 34 per cent in Q1FY22 (BIS: 35.8 per cent June’21) with the rise in GDP.
With ease in Covid-induced lockdowns and gradual resumption of business activities ever since India started its mega vaccination drive, the economy has seen a steady growth.
Economy witnessed its record highest GDP of 20.1 per cent in first quarter of FY21, mainly on account of low base effect.
Steady recovery in GDP has brought down household debts levels.
The SBI report noted that in absolute numbers, household debt has been estimated at Rs 75 lakh crore in FY22 from Rs 73.6 lakh crore in FY21.
In fact, India’s household debt to GDP ratio is still lower than other countries, though we need to supplement wage income, the report said.