New Delhi, April 14 A structural shift in India’s household finances has pushed physical assets, primarily real estate, to almost 70 per cent of household savings from the pre-pandemic average of 58 per cent during FY16-FY20, a report said on Tuesday.
Meanwhile, household financial debt has jumped to 6.2 per cent of GDP in FY24, compared to the pre-pandemic average of approximately 4.1 per cent, reducing net financial savings from 7.7 per cent to 5.2 per cent of GDP, the report from multi-family office Client Associates said.
Real estate investment climbed to 12.8 per cent of GDP in FY24, becoming the top savings category as lower mortgage rates and increased aspirations boost home purchases.
India's household financial landscape is experiencing significant structural changes. Despite maintaining its position as one of the world's top saving nations with gross national savings consistently exceeding 29 per cent of GDP, both the makeup of these savings and household credit usage have changed dramatically since the pandemic, the report said.
Personal and retail lending has expanded at a 17.6 per cent compound annual growth rate from FY16 to FY25, nearly twice the rate of nominal GDP expansion. Credit cards showed the strongest growth at 25.2 per cent CAGR, with other personal loans following at 20.1 per cent.
“Indian households have evolved beyond passive saving behaviour. They now function as active economic players who borrow to purchase assets, engage with financial markets, and influence how capital moves through the economy," said Nitin Aggarwal - Director Investment Research at Client Associates.
Investment flows into stocks and mutual funds have increased from about 4 per cent of financial asset flows in FY20 to an estimated 15 per cent in FY25.
Households provide nearly 60 per cent of India's total domestic savings and average close to 20 per cent of GDP each year, making them the largest and most reliable source of domestic capital.
The report suggested that higher borrowing levels indicate growing confidence and ambition rather than financial stress, particularly among youngsters but it also cautioned that increased debt levels can strain cash flow and limit financial flexibility without careful management.
India's young demographic profile, digital infrastructure, and expanding formal credit access are likely to speed up this transformation, it noted.
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