Skip to main content

India's household savings slowed down in fiscal 2012-17; to adversely impact GDP growth: Rating agency

By Our Representative
India Ratings and Research (Ind-Ra), the top Indian subsidiary of the Fitch Group, a global leader in financial information services, believes if the declining trend of household saving continues, it may pose a "serious challenge to the gross domestic product (GDP) growth and macroeconomic stability."
Suggesting that its estimation is based on the premise that the household sector, comprising resident households, not-for-profit institutions and quasi corporates, is the largest contributor to the savings in the economy, Ind-Ra says, during financial years (FY) 2012-17, it accounted 60.93% of the economy’s total savings, as against private corporations' 35% and public sector's 4.07%.
"Quasi corporates including unregistered micro, small and medium enterprises do not prepare their accounts similar to private registered/listed corporates. Thus, the falling savings rate (gross savings/gross domestic product) of the sector does not augur well for the economy", Ind-Ra says.
According to the top rating agency, "The growth of household savings at 3.7% was the lowest during this period among the three broad categories", even as the savings of the private corporations "grew 17.4%, while that of the public sector increased 12.9% during FY12-FY17."
Based on this, Ind-Ra says, "Household savings rate (gross household savings/ GDP) plunged to 16.3% during FY12-FY17." Pointing out that in FY12 it was 23.6%, it notes, "Household savings intermediated by banks and other non-banking financial entities are a major source of investment funding for the Indian economy."
Giving more details, Ind-Ra says, the declining share of household sector is visible even in case of nominal gross value added (GVA), where its share declined to 43.2% in FY17, as against 45.5% in FY12 "because of lower nominal GVA growth of the household sector than that of the private corporations and the overall economy".
It adds, "In FY17, the household sector contributed 94.8% to agriculture, 27.5% to industrial and 34.4% to services sectors’ nominal GVA."
"Although the twin policy shock of demonetisation and Goods and Services Tax had economy-wide ramification, it was more pronounced in case of the household sector", pointing out that the savings rate of the household sector "plummeted" 153 basis points (bp) year on year (yoy) in FY17, while for private corporations fell 12bp yoy. However, savings rate for the public sector increased by 37bp."
Basis point or bp refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 1/100th of 1%, or 0.01%, or 0.0001, and is used to denote the percentage change in a financial instrument.
The top rating agency further points out, "Even as micro, small and medium enterprises (MSME) category of the household sector finds it difficult to access credit, the credit to resident household has been rising at a much faster pace lately than the overall non-food credit."
Thus, it adds, "The share of resident households (personal loan) in non-food credit reached 25.9% in 1QFY19 (FY12: 18.2%). Resident households have emerged as a preferred choice for the banks post the deterioration in the asset quality of banks, owing to significant lending to corporates turning into non-performing assets (NPAs)."
Ind-Ra's warning comes even as it revised down its FY19 economic growth forecast to 7.2% from 7.4% earlier.

Comments

TRENDING

Importance of Bangladesh for India amidst 'growing might' of China in South Asia

By Samara Ashrat*  The basic key factor behind the geopolitical importance of Bangladesh is its geographical location. The country shares land borders with Myanmar and India. Due to its geographical position, Bangladesh is a natural link between South Asia and Southeast Asia.  The country is also a vital geopolitical ally to India, in that it has the potential to facilitate greater integration between Northeast India and Mainland India. Not only that, due to its open access to the Bay of Bengal, Bangladesh has become significant to both China and the US.

Swami Vivekananda's views on caste and sexuality were 'painfully' regressive

By Bhaskar Sur* Swami Vivekananda now belongs more to the modern Hindu mythology than reality. It makes a daunting job to discover the real human being who knew unemployment, humiliation of losing a teaching job for 'incompetence', longed in vain for the bliss of a happy conjugal life only to suffer the consequent frustration.

Buddhist shrines were 'massively destroyed' by Brahmanical rulers: Historian DN Jha

Nalanda mahavihara By Our Representative Prominent historian DN Jha, an expert in India's ancient and medieval past, in his new book , "Against the Grain: Notes on Identity, Intolerance and History", in a sharp critique of "Hindutva ideologues", who look at the ancient period of Indian history as "a golden age marked by social harmony, devoid of any religious violence", has said, "Demolition and desecration of rival religious establishments, and the appropriation of their idols, was not uncommon in India before the advent of Islam".

'BBC film shows only tip of iceberg': Sanjiv Bhatt's daughter speaks at top US press club

By Our Representative   The United States' premier journalists' organisation, the National Press Club (NPC), has come down heavily on Prime Minister Narendra Modi for recent "attacks on journalists in India." Speaking at the screening of an episode of the BBC documentary “India: The Modi Question,” banned in India, in the club premises, NPC President Eileen O’Reilly said, “Since Modi came to power we have watched with frustration and disappointment as his regime has suppressed the rights of its citizens to a free and independent news media."

Chinese pressure? Left stateless, Rohingya crisis result of Myanmar citizenship law

By Dr Shakuntala Bhabani*  A 22-member team of Myanmar immigration officials visited Rohingya refugee camps in Cox's Bazar to verify more than 400 Rohingya refugees as part of a pilot repatriation project. Does it hold out any hope for the forcibly displaced people to return to their ancestral homes in the Rakhine state of Myanmar? Only time will tell.

China ties up with India, Bangladesh to repatriate Rohingyas; Myanmar unwilling

By Harunur Rasid*  We now have a new hope, thanks to news reports that were published in the Bangladeshi dailies recently. Myanmar has suddenly taken initiatives to repatriate Rohingyas. As part of this initiative, diplomats from eight countries posted in Yangon were flown to Rakhine last week. Among them were diplomats from Bangladesh, India and China.

Natural farming: Hamirpur leads the way to 'huge improvement' in nutrition, livelihood

By Bharat Dogra*  Santosh is a dedicated farmer who along with his wife Chunni Devi worked very hard in recent months to convert a small patch of unproductive land into a lush green, multi-layer vegetable garden. This has ensured year-round supply of organically grown vegetables to his family as well as fetched several thousand rupees in cash sales.

Over-stressed? As Naveen Patnaik turns frail, Odisha 'moves closer' to leadership crisis

By Sudhansu R Das  Not a single leader in Odisha is visible in the horizon who can replace Chief Minister Naveen Patnaik. He has ruled Odisha for nearly two and half decades. His father, Biju Patnaik, had built Odisha; he was a daring pilot who saved the life of Indonesia’s Prime Minister Sjahrir and President Sukarno when the Dutch army blocked their exit.

Hillary Clinton, Al Gore, Ban Ki-moon, others ask Bangladesh PM to 'protect' Yunus

Counterview Desk  A campaign has been launched to support Bangladesh-based economist, micro-finance guru and Nobel laureate Muhammad Yunus, seeking signatures from citizens across the globe in order to “protect” his work, life and safety.

Electricity sharing opens up new window for India’s eastern neighbourhood engagement

By Sufian Asif* Today, challenges like climate change, pandemics, energy reliance, economic crisis, and many more are concerning us. No nation can overcome these obstacles without the assistance and collaboration of other nations. Most importantly, many of these problems have international repercussions. South Asia is facing much more difficulty when compared to other regions. In South Asia, we have some regional organizations, but they are ineffective.