Are Indian households turning cautious with their money? FY24 saw a rise in household investments as Indians directed more money into assets like real estate and gold. But experts worry that despite higher savings, people are spending less.
The latest data from the Ministry of Statistics and Programme Implementation (MoSPI) shows that household savings are going up slowly but still low. In the financial year 2024 (FY24), Indian households saved more money than last year. But, these savings are still low compared to before the pandemic (FY19).
For example, the net financial savings (money saved in banks, mutual funds, etc., after paying off loans) went up a bit from Rs 13.31 lakh crore in FY23 to Rs 15.52 lakh crore in FY24. But as a part of India’s overall economy (GDP), savings are just 5.2%, which is still quite low compared to 7.9% in FY19.
Savings are important because they help people spend and invest money later. When savings are low, people tend to spend less, which means companies earn less and don’t want to invest in new factories or businesses. This slows down economic growth.
That is why, this rise in savings, while good on paper, might actually signal a delay in consumption and investments. This is something that could affect our economy in the long run.
Household Investment and Savings Trends in India (FY19 to FY24)
| Basis | Value FY24 | Value FY23 | Value FY19 | Changes Observed |
| Net Financial Savings (Rs lakh crore) | 15.52 | 13.31 | Not specified | Increased from a 5-year low in FY23 |
| Net Financial Savings (% of GDP) | 5.2% | 5.0% | 7.9% | A slight increase, but lower than the pre-pandemic level |
| Household Investments (Rs lakh crore) | 54.61 | 50.1 | 38.44 | Increase in absolute terms |
| Household Investments (% of GDP) | 18.1% | 18.6% | 20.3% | Slight decline as % of GDP |
| Savings in Physical Assets (Rs lakh cr) | 38.45 | Not specified | 23.09 | Rose by 6.4% YoY |
| Savings in Gold & Silver Ornaments (Rs crore) | 65,104 | 64,504 | 42,673 | Slight increase |
| Household Financial Liabilities (Rs lakh cr) | 18.79 | 15.96 | 7.71 | Rose 17.7%, all-time high as % of GDP (6.2% FY24) |
| Gross Financial Savings (Rs lakh crore) | 34.31 | 29.28 | 22.63 | Increased by 17.2% YoY |
| Gross Financial Savings (% of GDP) | 11.4% | 10.4% | Not specified | NA |
| Gross Fixed Capital Formation (% GDP) | 27.7% | 25.4% | 29.5% | Proxy for investments improved from FY23 but was lower than in FY19 |
Net Financial Savings Rise from Five-Year Low
In FY24, the net financial savings of Indian households increased to ₹15.52 lakh crore, up from ₹13.31 lakh crore in FY23. As a share of the Gross Domestic Product (GDP), these savings moved slightly up to 5.2 per cent in FY24. This is a small recovery from a five-decade low of 5 percent in the previous year.
However, it still remains below the pre-COVID level of 7.9 per cent recorded in FY19.
Impact of Low Savings on Consumption and Investment
In FY24, India’s gross capital formation was 27.7% of the GDP, which is higher than last year (25.4%), but still lower than before the pandemic (29.5% in FY19).
This means businesses are slowly investing more, which can create jobs and opportunities, but the growth is cautious because people are saving less and borrowing more.
Experts warn that lower net financial savings can slow down consumption. This, in turn, affects business investments by large companies as well as micro, small, and medium enterprises (MSMEs).
Jayanth Varma, former member of the Reserve Bank of India’s Monetary Policy Committee, explained, “In addition to global uncertainties, if domestic demand is low, companies will hesitate to invest.
If a company wants to set up a factory, it will only go ahead if it sees enough demand for the next 10 years. Savings play a key role in driving consumption and demand.”
Fixed Capital Formation Sees Growth
Gross Fixed Capital Formation (GFCF), which represents investment in the economy, stood at 27.7 percent of GDP in FY24, up from 25.4 percent in FY23. However, it remains lower than FY19’s level of 29.5 percent of GDP.
Household Investments and Physical Assets
Despite concerns, total household investments rose to ₹54.61 lakh crore in FY24, up from ₹50.1 lakh crore in FY23 and ₹38.44 lakh crore in FY19. Investments by the household sector as a percentage of GDP, however, slightly declined to 18.1 percent in FY24 from 18.6 percent in FY23. It was 20.3 percent in FY19.
Household savings in physical assets also grew 6.4 percent year-on-year to ₹38.45 lakh crore in FY24. This is a significant increase from ₹23.09 lakh crore in FY19.
Borrowing and Consumption Trends
Economists believe there may be a slight improvement in savings in FY25 due to high interest rates for most of the year.
However, there is also a belief that savings in physical assets may decline in FY25, as overall savings (including those of the government and private sector) are expected to fall.
The Finance Ministry had earlier commented on FY23 savings, stating that the decline in net financial savings does not mean households are under financial stress. Instead, it reflects changing preferences. Households are increasingly borrowing to buy real estate and vehicles.
In FY24, financial liabilities of households rose sharply by 17.7 percent to ₹18.79 lakh crore, up from ₹15.96 lakh crore in FY23. In FY19, these liabilities were just ₹7.71 lakh crore. As a percentage of GDP, household financial liabilities reached an all-time high of 6.2 percent in FY24.
Rise in Gross Financial Savings
Gross financial savings increased by 17.2 percent in FY24 to ₹34.31 lakh crore, from ₹29.28 lakh crore in FY23. This is also higher than ₹22.63 lakh crore recorded in FY19. As a percentage of GDP, gross financial savings stood at 11.4 percent in FY24, up from 10.4 percent in FY23.
Gold and Silver Investments See Slight Rise
Household savings in gold and silver ornaments stood at ₹65,104 crore in FY24, a small increase from ₹64,504 crore in FY23. In FY19, this figure was ₹42,673 crore.
While India’s households have increased their financial savings in FY24, concerns remain around rising debt and delayed consumption. Experts suggest that although savings are growing, they are being accompanied by higher borrowing. This may affect future investments if used more for consumption than asset creation.
Source: MoneyControl
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