The debt burden on common people has increased rapidly. The debt burden on these families more than doubled to Rs 15.6 lakh crore.
This is the second time after independence when people’s financial liabilities have increased so rapidly.
Also, according to the data received from the research report of SBI, the net financial savings of the families fell by about 55 percent in the last financial year to 5.1 percent of the gross domestic product (GDP), which is the lowest in the last five decades.
Fall in family savings may be a matter of concern. According to Soumya Kanti Ghosh, Chief Economic Advisor of State Bank of India (SBI) Group, this has probably happened due to the low interest rate system.
This is the biggest decline in domestic savings in the last several decades and it is natural to have an impact on the economy.
Financial liabilities of households are said to have increased by Rs 8.2 lakh crore since the pandemic, which is more than the increase in gross financial savings by Rs 6.7 lakh crore.
There was an increase of Rs 4.1 lakh crore in the level of wealth of households in insurance, provident funds and pension funds during this period.
Of the Rs 8.2 lakh crore increase in the level of household liabilities, Rs 7.1 lakh crore is the result of domestic borrowing from commercial banks.
However, in the last two years the form of household financial savings has changed to household physical savings.
Improvement in the real estate sector and rising property prices have increased the trend towards physical assets.
However the Finance Ministry rejected the criticism over the decline in domestic savings and said that people are now investing in other financial products and there is no such thing as a crisis.
Data also shows that consumers are now inclined towards various financial products and this is the reason why household savings have reduced.
On one hand it is being said that employment has increased in the country. Despite the increase in people’s income, the increase in debt and decrease in savings proves that people are spending whatever they are earning.
According to the experts, rising inflation has a major role in decreasing savings and increasing debt.
That means families are increasing borrowing to meet their consumer needs. Whereas for general government finance and non-financial companies, the most important source of fund raising is domestic savings.