Household savings plunged during Covid 19 but is now gradually touching pre-pandemic levels

<p>
Domestic household financial savings expectedly plunged to 10.4 per cent of GDP in the second quarter of the current financial year from 21 per cent in the first quarter of 2020-21− the peak of Covid-19, according to financial services major Emkay Research. “This is well corroborated by increasing household discretionary consumption and narrowing of the current account surplus,” the research noted.</p>
<p>
However, it still remains higher than 8 per cent seen in FY20, it said, adding that India’s correction in high financial savings rate is much better than some of the major developing markets in Q2 FY21.</p>
<p>
In terms of fund composition, household deposits and borrowings picked up in Q2, while currency holdings and savings in mutual funds moderated, the financial services major said. “Going ahead, household financial savings will likely moderate further in Q3, driven by the normalization in household spending and savings. Some offset may emerge amid portfolio re-balancing by households towards equities,” the study said.</p>
<p>
The flow of household financial assets in absolute terms has increased, driven by bank deposits, despite a significant drop in holdings of currency and mutual funds.</p>
<p>
Cross-country comparison shows that while India's household financial savings reverted to near pre-pandemic levels in Q2 FY21 in comparable developed markets it was still higher in Q2 FY21 than pre-Covid-19 levels despite a significant correction, the study noted.</p>
<p>
 </p>