Savings pip investments for the first time in 2020-21

Mumbai: India’s financial savings hit a two-decade high in FY21, with savings exceeding investment for the first time.
Household sector financial savings – the largest source of funds – jumped 3.6 percentage points to 11.5% of gross national disposable income (GNDI) in 2020-21, the highest in more than two decades. In addition, for the first time since 2004-2005, savings exceeded investments in 2020-2021. The household sector surplus amounted to 11.8% of GDP in 2020-21. The resource gap of private non-financial corporations closed in 2020-21 due to reduced investment in the context of the pandemic.
“The reduction in discretionary spending amid the pandemic and the associated forced saving and an increase in precautionary saving on concerns over short-term income flows has boosted household saving,” the RBI said. in its annual report.
The “financialization” of savings continued in FY22. Of the net resources raised by mutual funds of Rs 2.5 lakh crore in 2021-2022, Systematic Investment Plan (SIP) contributions have seen healthy growth – an indication of the growing participation of retailers and households choosing financial instruments to save.
However, the gross domestic savings rate had fallen to 27.8% of GNDI in 2020-21 from 29.4% a year ago due to dissaving from the general government sector and a decline in the savings of non-financial corporations. The reduction in savings by the general government sector increased due to a spike in spending to mitigate the impact of the pandemic.