Household Savings Rate Falls To 47-Year Low In India

[fiby41]

This is a 47-year low.

Savings rate was 23.6% of GDP in 2011-12 which fell to 10.8% in 2022-23



Just for reference, my debt to net worth ration 0.2

Photo credits: The Hindu newspaper website.

[ertyu]

So, basically, households are getting poorer relative to gdp and are making up for it with borrowing?

[fiby41]

So, basically, households are getting poorer relative to gdp and are making up for it with borrowing?

Or maybe they are getting more aspirational. The data used to plot these graphs is released by the Reserve Bank of India and has been interpreted in various ways:

BBC says it is a break from tradition as India has been seen as a nation of savers who stash away a significant portion of their earnings for future security often at the expense of current consumption.

Households are relying now on debt to fuel consumption due to which savings erode. More the borrowing, larger is the part of income going towards debt repayment, leaving less for saving.

Financial Express says the main reason for the decline is a rise in short-term credit. People are spending more money because they have easier access to loans. The finance ministry says this is not a sign of distress.

Wire says household debt is high and savings are low, despite GDP growth. There has been a surge in credit access. Weak wage growth and leveraged consumption are likely to hurt consumption growth. Experts say the private sector will not invest if consumption growth is low.

Crisil reports that there are early signs that household savings are on the rise in FY24. This is likely due to a combination of factors including a slowdown in private consumption and a rise in bank deposits. The report also points to an increase in mutual fund investments and a moderation in retail credit growth.

[delay]

A former colleague from India told me his new house had a price that was in the range of European house prices, like $250,000, and that was 10 years ago. Countries like The Netherlands, Denmark and Norway have giant household debts balanced by giant house values.

What is the relation between these numbers and home ownership?

[Henry]

China and India introduced Western consumerism into their countries. The restrictive nature of Chinese government prohibits Western consumerism from devouring the country like it has in the US and seems to be doing in India.

[ducknald_don]

The restrictive nature of Chinese government prohibits Western consumerism from devouring the country like it has in the US and seems to be doing in India.

I don't know, their recent problems in the property sector seem to be casting a long shadow across the economy. They are also facing exactly the same demographic problems the West is.

[ertyu]

They might not have western consumerism but they have eastern consumerism. Same shit different day. Might be biased but I'd say the Chinese brand of consumerism is more damaging psychologically - people there are very aware that their function to others is about how they'll make others look: the wife must be pretty to build up your ego and your image to the other guys, your friends must be flashy to make you look successful, powerful, and gungho by association, etc. People depend much more on networks for favors and security, so falling out of one's social status might have real consequences in terms of no longer belonging and feeling like your survival is threatened. Furthermore, it's not just you, you reflect on your whole family, so you being a weirdo affects their outcomes as well.

The line between consumerism and status is much thicker, and the line between status, belonging, and survival is much thicker. In the west, your friends might think you're a weirdo but this won't necessarily mean they quiety distance themselves from you so as not to lose face or be seen in the same light by others. This is also where the whole "you must have a car and an apartment to be married" comes from for the middle class - this image of security, of how things appear.

Western consumerists are dumb and superficial by comparison, it's all pink plastic junk, shiny shit, fancy gadgets, some guy with his "emotional support vehicle" trying to feel manly via his truck, etc. It's much more superficial and dumb, but that also makes it easier to extricate oneself from.

The tldr is, idk if id say that china has been somehow saved by being devoured by western consumerism, it's got its own shit and set of circumstances going on

[fiby41]

What is the relation between these numbers and home ownership?

Yes, it is quite expensive, especially in metros, when compared to the salaries. I will have to shell 10% of salary to rent a single bed in a shared room or half for salary for renting an apartment so I do not live on my own. There is the PMAY Housing Scheme which provides subsidies on home loan interest based on income or for constructing own home. There is also provision for constructing of rental housing complexes targeted towards urban migrants.

Regarding home ownership, the rural home ownership rate is 95% but only 69% live in their own house in urban areas. Those who come to take up irregular work in the cities see it only as temporary work to be done for a few years and then return to their villages where they can enjoy a higher standard of living and a rupee stretches farther than in the city they earned it in. Not only them, but even among those who get a full-time job in a city or have worked their entire 30-years in a city, only half would elect to stay there in retirement. Why buy a flat and pay for it with a third of your salary for 15 years when you can build a three storied bungalow in your village for the same amount.

@Henry that is an interesting take.
There seems to be a saturation of malls vis-a-vis demand if ghost shopping centers are an indication.
Ghost malls are defined as those having a vacancy of more than 40%. Their preponderance has increased by 59% YoY covering ~13 million sq ft.

@ducknald_don What is that demographic problem?

@ertyu do you think there is any overlap between the two types of consumerisms?

[grundomatic]

China and India introduced Western consumerism into their countries. The restrictive nature of Chinese government prohibits Western consumerism from devouring the country like it has in the US and seems to be doing in India.

I don't know. Seems like I saw the worst of US Consumer Culture when I was in China in 2019. New malls, luxury brands everywhere, overpriced to-go drinks (Hey Tea rather than Starbucks), etc.