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

Buddhist shrines massively destroyed by Brahmanical rulers in "pre-Islamic" era: Historian DN Jha's survey

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".

India sees 62 journo deaths, 4th highest, amidst pandemic: Swiss media rights body

By Our Representative The Switzerland-based media rights body Press Emblem Campaign (PEC) has noted that India is the fourth most affected country as far as mediapersons’ death on account of Covid-19 is concerned. According to Blaise Lempen, secretary-general of PEC, the global tally of casualties among media persons in the Covid-19 pandemic has reached 1,036 journalists in 73 countries till date.

Liberating Bengal Hindus? Worst flames of communal division, lessons from the past

By Shamsul Islam*  The whole thrust of the RSS-BJP election campaign for 2021 state assembly elections in West Bengal has been to save Bengal from the rule of Mamata Bannerjee who is allegedly not a ‘Hindu’. Prime Minister Narendra Modi, a self-proclaimed Hindu nationalist, as usual set the polarizing agenda. While addressing the first election rally, he called upon the electorate to overthrow the ‘nirmam’ (cruel) rule of Mamata by showing a ‘Ram Card’. He did not name Hindus directly but there was no confusion about the religious identity of the electorate Indian PM was addressing to.

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.

Pradeep Bhattacharya, who spent his life for the cause of working masses, rational thinking

By YS Gill*  At 11:30 pm on May 3, 2021, I lost my best friend and comrade Pradeep Bhattacharya. He spent his life dedicated to the cause of the working masses and rational thinking. A person of thorough scientific outlook and a well-read student of Marxian thought, he was a walking encyclopedia and could speak on a wide variety of topics from art and culture to science, philosophy, history and politics.

Rs 5 crore 'demand' for India Today anchor: What about 52 lesser souls who died in April?

By Vidya Bhushan Rawat*  A well known Hindutva protagonist masquerading as journalist passed away recently resulting in messages of condolences and tribute right from the Prime Minister and the Home Minister to progressive liberals expressing grief of his untimely death. It is said that he passed away due to cardiac arrest, though the fact is, he was also Covid infected. The Prime Minister and the Home Minister termed him a ‘brave’ journalist, insisting, his passing away has left a big ‘vacuum’.

Modi's Hindutva 'ensuring' empowerment of rich, disenfranchisement of poor

Bhabani Shankar Nayak*  The Hindutva socio-psychopaths are neither nationalists nor patriotic people. These medieval reactionary forces don’t understand the idea of citizenship, justice, liberty, equality and humanism. Indian democracy is merely an electoral transaction for the Hindutva forces. Hindutva forces neither follow science nor understand the sufferings of fellow human beings. These core qualities are common among the Hindutva forces in India.

Communal rhetoric? Hindutva preached by RSS-BJP is 'monolithic', not Hinduism

By Prem Verma*  I am a devout Hindu but not a believer of RSS Hindutva form of Hinduism which brings about hatred of other religions. My Hindu religion has not taught me to look down on other religions and neither has it instilled in me to go about converting others to my religion because my religion is superior.

India's Covid-19 'nightmare': A product of majoritarian Hindutva ideological praxis?

By Bhabani Shankar Nayak*  Indians struggle to find place and time to bury their dead due to the devastating effects of the second wave of Covid-19 in India. The crematoriums in the capital cities are overflowing with dead bodies. People are dying without oxygen and basic medical support. The cities like Delhi and Mumbai are struggling to cope with the rising number of infections and COVID-19 led deaths. The deaths and destitutions are products of a defunct BJP government led by Narendra Modi.

Indian media persons collapsing to Covid disease as fast as 3 per day, third highest

Yogesh Sharma, Shailesh Rawal  By Our Representative  The Switzerland based media rights and safety body, Press Emblem Campaign ( PEC ) has said that it is “alarming for Indian journalists”, who have lost at least 107 colleagues to Covid-19”, noting, Indian “journo-colleagues” have been collapsing to the Covid-19 complications now as fast as three scribes per day. In a statement, PEC said, “India with 107 media corona-casualties has already placed itself on the third position just below Brazil (181 dead) and Peru (140) in the list of Covid-19 victims among journalist.”