Credit over caution: Household savings in India fall to 18.1% of GDP; more Indians rely on credit to fund expenses

Time of India

8 hours ago

India's household savings have slipped to a new low for the third consecutive year, falling to 18.1% of GDP in FY24, according to a report by CareEdge Ratings.
On the other hand, household debt rose to 6.2% of GDP, almost twice as much as ten years ago, showing that more Indians are borrowing to meet their everyday needs, the report said.
The report also pointed to a wider dip in gross domestic savings, which dropped to 30.7% of GDP in FY24, down from 32.2% in FY15.
Despite the worrying decline in savings, the report notes a more promising outlook in rural India. Wage growth for rural male workers rose 6.1% year-on-year in February, marking the fourth straight month that earnings outpaced rural inflation. Easing food inflation and healthy agricultural prospects are also helping boost rural consumption.
'Going ahead, RBI policy rate cuts, lower tax burden and continued easing of price pressures remain key tailwinds for the broad-based demand recovery,' CareEdge said in the report.
Rural consumer confidence is showing cautious optimism, holding steady near the neutral 100 mark. Meanwhile, urban consumer sentiment remains subdued, although expectations for the year ahead remain hopeful across both rural and urban households.
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The report also highlighted a broader trend of cost control in corporate India. Labour cost growth in major IT firms, for instance, has dropped from a high of 26% in Q3 FY23 to just 4% in Q3 FY25, pointing to continued efforts at cost rationalisation.
On the inflation front, there's more good news. India's retail inflation, measured by the Consumer Price Index (CPI), fell to 3.2% in April 2025, the lowest since August 2019. However, prices of essentials such as edible oils (up 17.4%) and fruits (up 13.8%) remain stubbornly high. A strong Rabi harvest, healthy water reservoir levels, and forecasts of an above-normal monsoon are expected to help stabilise food prices further.
As per government data, the Indian economy grew by 6.5% in real terms in FY25, signalling resilience despite pressures on household balance sheets.
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