The determinants of household savings in India

While the proposed changes in tax laws are applauded it is not clear how household savings will move in India in the future

The Union Budget aims to usher in a major reform in the personal income tax structure in India. It has made a beginning by introducing two tax slabs, one with exemptions and the other without. The government has also made it clear it aspires to eventually move towards a clutter-free simplified tax regime. While such a move is appreciated, it comes against declining household financial savings. Household financial liabilities have jumped Rs 3 trillion for the two-year period ended FY19 with net financial savings declining by Rs 80,000 crore in FY19 and it might have declined further in FY20. Against