Household Financial wealth still higher than the pre pandemic levels

Concerns over rising household leverage may be uncalled for as the estimates of net financial wealth (NFW) of Indian households as a percentage of GDP at 97 percent as March 2023 is still higher than pre pandemic level of 85 percentage of GDP according to estimates in a research paper by RBI economists published in the latest RBI Bulletin.

As of March 2023, total household financial assets are estimated at Rs 363.8 lakh crore, equivalent to 135.0 per cent of the gross domestic product (GDP). In contrast, the outstanding liabilities amounted to ₹101.8 lakh crore, accounting for 37.8 percent of GDP. The resultant NFW is estimated at Rs 262.0 lakh crore (97.2 percent of GDP), according to a paper by Anupam Prakash, Suraj S, Ishu Thakur and Mousumi Priyadarshini of the department of economic policy research. The views are however this of the authors and the central bank.

" The household wealth estimate from the study suggests that though their borrowing is going up, the assets are also rising," said Madan Sabnavis, chief economist at Bank of Baroda." As a percentage of GDP household wealth is still higher than the pre=pandemic levels.


The pandemic period witnessed a jump in the financial assets and NFW for the two-year period from March 2020 to March 2022 . In 2022-23, with the resumption of normal economic activities, the NFW also normalised due to a strong revival in both bank and non-bank lending to households coupled with a relatively moderate growth in financial assets, the authors said.

The study covered a twelve year period starting from June 2011 to March 2023. Household debt to financial assets ratio has remained stable during the period. " While the indebtedness of Indian households has been on an upward trajectory reflecting financial deepening, it needs to be seen in the context of an increase in their financial assets as well. The household “leverage” ratio - defined as the ratio of household debt to financial assets - has remained largely flat and range-bound since 2011-12 " the authors said.

The study assumes significance as the recently published Financial Stability report has expressed concerns over rising household debt. “ With overall household savings declining to 18.4 percent of GDP in FY:2022-23 from an average of 20.0 per cent of GDP over 2013-2022, and coupled with an increasing trend in financial liabilities, household debt warrants close monitoring from a financial stability perspective” the Reserve Bank of India said in its latest Financial Stability Report.

Also. many economists have expressed concerns about the net financial savings of Indian households falling to a multi-decade low as financial liabilities have increased which could impact economic growth and stability.