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Precautionary savings

Slowdown impact on household finances even before Covid

Topics
Household savings | Coronavirus | Lockdown

Business Standard Editorial Comment  |  New Delhi 



Households tend to save more during the time of economic turmoil and income uncertainties. Since this can affect aggregate demand in the economy, governments are expected to run larger deficits. The current economic chaos is very different from the usual business cycle slowdown. The contraction is the result of a deliberate shutdown of economic activity to contain the spread of Covid-19, which has resulted in significant hardship for a large number of households. India was anyway witnessing a sharp economic slowdown even before the spread of the virus and its impact was visible in household finances. As the outlook has now become even more uncertain, the impact on household finances is expected to play out for a long period of time. If the recovery is seen to be slow, households would get more risk-averse and cut consumption further.

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First Published: Sun, June 21 2020. 23:11 IST

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