Savings of common people have fallen to the lowest level in many decades, this is how the country's economy is shaking.

The saving habit of common people in India also affects the country's economy. But now it has reached its lowest level in several decades, so what effect is it having on the country's income? Let us know...

In their times, our elders used to pay a lot of attention to savings along with expenditure. That's why you often get to read such news that someone found gold buried in a field. The subsequent generation saved in many ways, from banks to post office savings schemes. But at present, the savings of common households in the country have fallen to the lowest level in several decades. On the other hand, people's liabilities are increasing, hence this decline in savings is shaking the country's economy.

If we look at the average of the last 10 years, the savings of common households as a proportion of the country's GDP has remained at 7.7 percent. Whereas in 2020-21, when people's expenses decreased during Covid, these savings went down to 11.5 percent. Whereas in 2022-23, it has come down to just 5.1 percent.

Why is the savings of common households decreasing?

According to RBI, in 2022-23, savings of common households have come to the lowest level in several decades. A major reason for this was that the demand in the market increased after Covid, but the supply remained limited. Due to this, a rise in inflation rate was seen. At the same time, the Russia-Ukraine war increased energy prices, which affected the global supply chain and increased inflation further.

Retail inflation in India will average 6.7 percent in 2022-23, while the average over the last decade was 5.4 percent. In this way, high inflation and decreasing purchasing power of people have affected the savings of common households.

Decreased savings-increased debt

According to a report by Systematics, on one hand the savings of common people have decreased, on the other hand their debt burden has increased. However, people's assets have also increased, which means a part of people's savings is going into asset creation. Despite RBI increasing interest rates several times, the debt burden in the country has increased by 75 percent, in which the growth of bank loans has been 56.65 percent. Whereas the growth of assets has been only 14 percent.

On the contrary, people's direct investment in the stock market has decreased by 52.61 percent. Whereas in life insurance and mutual funds it was 14.53 percent and 11.51 percent respectively.

Why is it important for common people to save?

Both consumption and investment contribute to India's national income. People's savings generate funds for investment, which helps in national income. Common people, private corporate and public sector participate in savings.

Therefore, when the government has to increase its expenditure, then it has to increase its revenue and in this work only the savings of the common people are useful. In its absence the government has to take loans from outside. If we look at the last 10 years, the government's savings have declined by 2.1 percent of the GDP. The share of common households in the total savings of the country had reached 65 percent in 2021-22.

This is how the country's economy is shaking.

Due to falling savings of common people, the government is facing challenges in improving its financial condition and fiscal position. On the other hand, increasing debt of the people has increased the pressure on them which is harming the consumption in the country, i.e. another loss in the national income.

Compared to GDP, household debt has increased to 37.6 percent in 2022-23. In 2022-22 it was 36.9 percent. Due to falling savings and income of people, but increasing debt burden, their ability to repay loans is also decreasing.