Household Financial Savings Rate Falling On Intensification Of Consumption And Economic Activity Says RBI

According to a latest update from the Reserve Bank Of India (RBI), the preliminary estimates show a substantial waning of the household financial savings rate to 10.4% of GDP in Q2:2020-21 from the high of 21.0% in the immediately preceding quarter, as households switched from an 'essentials only' spending to discretionary spending with the gradual reopening/unlocking of the economy. Household debt to GDP ratio, which has been steadily increasing since Q1:2018-19 rose sharply to 37.1% in Q2:2020-21 from 35.4% in Q1:2020-21. The moderation in household financial savings has taken place despite an increase in their financial assets, as the flow of financial liabilities returned to positive territory on the back of loans from banks and NBFCs in Q2:2020-21. Households' financial savings rate might have fallen further in Q3:2020-21 with the intensification of consumption and economic activity.

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