Here and there, criticism was being charged upon the ruling party at Centre that it's fiscal policies were responsible for declining savings in the country.

Recently, the Finance Ministry has sidelined all these critical remarks. It's true that savings have declined to a multi-decade low arguing that people are not saving their money today in the forms of bonds, shares, investments, and deposit funds but are rather doing expense and using it to purchase assets such as property, gold and other things of valuable nature and for that they are applying loans in large numbers.

'It's not a sign of distress for the country but an opportunity of great employment and income prospects.'

Data released by the RBI showed that net household financial savings dropped to 5.1% of GDP in 2022-24 to the lowest rate since 1976-77.

Why is this happening?

It's happening because of the change in 'Consumer Preference'. Earlier, people preferred to save their money in shares, bonds, or mutual funds but now they want to enhance their standard and quality of life by purchasing assets of material value. Now, households in India have started to take loans to buy real assets such as homes or vehicles.

Sharing data on growth in personal loans from the RBI, the Ministry said there has been a steady double-digit growth in loans for housing since May 2021, indicating that financial liabilities have been incurred to purchase assets.

Also, it has been noted that the ratio of household savings to nominal GDP has remained constant from around 20% to 19% as of 2021-22.

Micro-finance loans, loans to SHGs, advances to individuals against gold and other loans, vehicles and real estate have increased the high flow of loans in the economy.

Thus, a reduction in household savings in the country is not bad news for the country. Instead, it's coming of an opportunity for the Real GDP growth of the country.

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Reference:

• twitter.com/FinMinIndia
  
• thehindu.com
• business.outlookindia.com