July 18, 2024, New Delhi: Faced with a declining earnings and savings scenario, many Indian households are hoping that Budget 2024-25, to be presented by Finance Minister Nirmala Sitharaman will bring some respite. Many have been writing about the rising costs related to food, school education, rent, transportation, cost of electricity, etc., the basic expenses incurred by a middle-class family. The big concern being a declining earnings scenario for many and the need to dip into savings, ancestral property/land or take loans, just to make ends meet.

Net household savings in India declined sharply by INR 9 trillion to INR 14.16 trillion in the three years to 2022-23 (FY23). Overall, India’s household savings rate has fallen from 22.7% of GDP in FY21 to 18.4% in FY23, as per the National Account Statistics 2024 data released by the Ministry of Statistics and Programme Implementation (MoSPI). Household savings had touched a peak of INR 23.29 lakh crore in 2020-21, the year which saw the second wave of the Covid pandemic. Following that it has been on the decline. It then fell to INR 17.12 lakh crore in 2021-22 and further to INR 14.16 lakh crore in 2022-23.

In the last decade, the growth rate of financial liabilities, at 16.1% year-on-year, has exceeded that of gross financial assets, which averaged 10.8% year-on-year. Notably, in FY2022-23, there was a significant surge in financial liabilities, rising by 76% year-on-year, leading to a considerable decline in net financial assets.

Taking note of the concerns cited by household consumers on its platform and the fact that Budget 2024-25 will be presented next week, LocalCircles conducted a national survey to find out what are households projecting on the earnings and savings front. The survey received over 21,000 responses from household consumers located in 327 districts of India. 67% respondents were men while 33% respondents were women. 44% respondents were from tier 1, 32% from tier 2 and 24% respondents were from tier 3, 4 and rural districts.

48% consumers surveyed believe their annual household earnings will reduce in FY 2024-25 in comparison to FY 2023-24

Sustainable employment or livelihoold being a major concern for many households, the survey first asked them, “Where do you believe your household income will be in the current 12 months (April 2024-March 2025) in comparison to previous 12 months (April 2023-March 2024)?” The question received 10,977 responses with 7% projecting that their household income “will reduce by 25% or more”; 30% projected that it “will reduce by 10-25%” and 11% projected that it “will reduce but can’t say how much right now”. However, 26% of respondents expect “no impact”; 15% of respondents are optimistic the household income “will increase by 0-25%” and 11% indicated that they are hopeful it “will increase but can’t say how much”. To sum up, 48% of consumers surveyed believe their annual household earnings will reduce in FY 2024-25 in comparison to FY 2023-24.

48% consumers surveyed believe their average household savings will reduce in FY 2024-25 in comparison to FY 2023-24

As income and expenditure have direct impact on the household savings, the survey next asked respondents, “Where do you believe your household savings will be in the current 12 months (April 2024-March 2025) in comparison to the previous 12 months (April 2023-March 2024)?” The question received 10,820 responses with 10% indicating that it will “likely increase by 25% or more”; 10% indicated that it will “likely increase by 0-25%”; 10% indicated that it is “likely to increase but can’t say how much”; and 18% stated that it is “likely to stay the same”. Of the remaining respondents 28% indicated that the savings are “likely to decrease by 0-25%”; 15% indicated that it is “likely to decrease by over 25%”; and 5% indicated that the household savings are “likely to decrease but can’t say how much”. In addition, 4% of respondents did not give a clear response. To sum up, 48% of household consumers surveyed believe their average household savings will reduce in FY 2024-25 in comparison to FY 2023-24. Such a large percentage of households indicating that savings will decline is an extremely concerning situation and points to the fact that costs of living and expenses are growing at a much faster pace than the earnings, leading to many households to dip into their savings. In some other cases, families are taking a mortgage against their assets, liquidating them or taking a personal loan just to make ends meet or to pay for college education for a child.

In summary, the survey shows that while 48% of consumers surveyed believe their annual household earnings will reduce in FY 2024-25 in comparison to FY 2023-24, an equal percentage of consumers project that their average household savings will reduce in FY 2024-25 compared to the previous year. 15% households are projecting an over 25% dip in savings this year while 7% of them are projecting a 25% or higher drop in household earnings. Based on comments received from household respondents, this is largely due to higher cost of living and other expenses, often resulting in asset mortgage or liquidation, borrowing for personal use apart from loans taken for buying a flat/ house/ vehicle or even education. With the Finance Minister presenting Budget 2024-25 next week, feedback from households indicates that many are hoping for some respite from this squeeze, be it reduction in income tax rates, expansion of income bracket that gets zero tax or increase of deduction limits under 80C.

Survey Demographics

The survey received over 21,000 responses from household consumers located in 327 districts of India. 67% respondents were men while 33% respondents were women. 44% respondents were from tier 1, 32% from tier 2 and 24% respondents were from tier 3, 4 and rural districts. The survey was conducted via LocalCircles platform, and all participants were validated citizens who had to be registered with LocalCircles to participate in this survey.