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The Finance Ministry Addresses Concerns Over Household Savings

The Finance Ministry Addresses Concerns Over Household Savings

The finance ministry has responded to concerns regarding the decline in household savings, asserting that there is no cause for alarm. The statement comes amidst growing criticism regarding the impact of diminishing savings on the economy. According to the ministry, changing consumer preferences for various financial products are driving this trend, and there is no widespread financial distress as some circles suggest.

Changing Consumer Preferences: The finance ministry points out that shifting consumer preferences are the primary reason for the decline in household savings. People are increasingly investing in different financial products, indicating a diversification of their investment portfolios. This diversification includes exploring options beyond traditional savings.


  • Net household savings have fallen to a 47-year low at 5.1% of GDP in FY23, compared to 7.2% in the previous year.
  • Annual financial liabilities of households have surged by 5.8% of GDP compared to 3.8% in 2021-22.

Positive Indicators: The finance ministry provides several reasons to support its claim that there is no distress in the household sector:

1. Steady Growth in Loans for Real Assets:

  • Individuals are increasingly taking loans to purchase real assets such as homes, supported by the collateralization of these loans.
  • The growth of loans for housing has been in double digits since May 2021.
  • Vehicle loans have also witnessed double-digit growth since April 2022, indicating confidence among households in their financial stability.

2. Net Financial Assets Continue to Grow:

  • Households added financial assets worth Rs 13.8 lakh crore in FY23, which, although lower than previous years, indicates overall growth.
  • The decline in financial assets added is attributed to the shift towards investing in real assets through loans.

3. Significant Flow of Credit from NBFCs:

  • Non-Banking Financial Corporations (NBFCs) have played a crucial role in providing credit to households.
  • In FY23, NBFCs lent nearly Rs 2,40,000 crore to the household sector, representing an 11.2-fold increase from the previous year.

Consumer Confidence: The finance ministry emphasizes that these financial choices reflect confidence in future employment and income prospects. Recent surveys, including the Consumer Confidence Survey by RBI, have supported this assertion, showing optimism among consumers about their financial situations.

Conclusion: In conclusion, the finance ministry’s statement attempts to allay concerns about declining household savings. It attributes the shift in savings patterns to changing consumer preferences and highlights the positive indicators of increased loans for real assets and growing net financial assets. The ministry believes that these trends reflect confidence among households in their financial well-being.

Why are household savings declining, and is it a cause for concern?

Household savings are declining due to changing consumer preferences and a shift towards investing in various financial products. While it may raise concerns, the finance ministry argues that it reflects evolving financial strategies rather than widespread distress.

What are the key indicators that suggest households are not in financial distress?

The steady growth in loans for real assets like homes and vehicles, coupled with a continued increase in net financial assets, demonstrates confidence in future income prospects. Additionally, the flow of credit from Non-Banking Financial Corporations (NBFCs) is substantial.

How does changing consumer behavior impact the economy?

Changing consumer preferences influence how people allocate their finances. In this case, diversifying investments beyond traditional savings may have a positive impact on sectors like real estate and automobiles.

What surveys or data support the claim of consumer confidence?

The Consumer Confidence Survey conducted by RBI and the C-Voter Survey of Consumer Optimism in July and August highlight consumer optimism about their financial well-being, further backing the finance ministry’s statement.