India’s household financial savings climbed to 21.4% of gross domestic product in the June quarter from 7.9% in the year earlier, preliminary data released by the Reserve Bank of India’s November bulletin on Wednesday showed.
The sharp increase in household savings may be attributed to the pandemic-led reduction in discretionary spending and the surge in precautionary saving despite stagnant or reduced income.
The central bank said that while the key determinants of household financial savings—in particular, income and interest rate—deteriorated significantly during the June quarter, there were also changes in the consumption pattern of non-essential items. What the extra savings does is give people enough room to spend once economic conditions, and more importantly the sentiment, revive.
“We are upbeat on consumer demand with a positive start to this festive season with a 30% growth across air-conditioner, refrigerator, washing machine and microwave categories over last year,” said Suguru Takamatsu, divisional head, CSD, CE, Panasonic India.
“It is possible that additional household savings and need for convenience when working from home has encouraged consumers to spend more on appliances that make life easier for them in the current environment,” he said.
According to the report, the propensity of households to save may have risen significantly during the pandemic on two counts. Firstly, the households would have been forced to save more, being unable to consume up to their normal levels and secondly, they may have raised their precautionary