Income Crisis Reflects In Household Savings, Jairam Ramesh Points At A Report Based On RBI Data
Senior Congress leader Jairam Ramesh has posted an article on his X handle which suggests that there is an income crisis, reflecting in the fall in household (HH) savings. The report centered on the reduction in household savings and debt taken to fund consumption. The report says that the growth in household income has taken a hit, which is because of the sharp slowdown in real household consumption in the financial year 2023, along with the contraction or reduction in the net financial assets. The report is based on the data released by the Reserve Bank of India.
The primary indication of the RBI data pointed to savings, that it has come down to 19 percent in 2023, not considering the liabilities, it is 2 percent less than the four-year compound annual growth rate (CAGR). The reduction in HH savings was by a fifth in the year 2023. The data, indicated that the incremental non-mortgage borrowing growth went up by 99 percent.
Apart from the low house hold savings rate, which the post called, “at historic lows,” the “income growth adjusted for inflation over the past four years is the slowest in the past 40 years!”
The growth of HH’s financial assets had gone up by 13.9 percent in 2023, which is mainly from recovery in deposits due to rising deposit rates. The “flow” of household liabilities, the report said, grew “faster” than that of assets at “75.5 percent year on year, 19.7 percent and 26.9 percent on a four and three-year CAGR basis.” The report read, “the booming HH financial liabilities are increasingly funding consumption expenditure.”
The article which centered around the RBI data touched upon the assets and liabilities and the income aspect of household, summarising on the structural fragility it called for.
“The contraction in HH savings and the rising cost of living have translated into an exponential rise in the HH debt to fund consumption.” Saying that this is not episodic, the report further said, “since FY12 real PFCE (5.8 percent 11-year CAGR) has exceeded real HH income growth (4.8 percent). This perhaps makes it the longest phase shortfall in the last 69 years; in the previous 58 years, income exceeded consumption growth in 47 years by an average of 0.5 percent,” concluded the report.
The data, Mr. Ramesh said, “explains why the Modi government is burying the Consumption Expenditure Survey of 2022-23. It will reveal in stark terms how most Indians are getting poorer,” he added.
For the analysis, the last three to four years and the last year have been considered. His post is not bereft of criticism. The Twitterati has engaged in an effective conversation on this with some of them even pointing at different causes for the shortfalls.
