Household savings fell to a five-year low in the country

MUMBAI: Domestic savings in the country fell to a five-year low in FY2022. A report said that this has affected domestic savings as consumers' purchasing power is reduced due to high inflation. High inflation is said to be the reason for the decline in savings.

After remaining at 12 percent in the three years ending at the end of fiscal 2020, gross financial domestic savings which stood at 15.90 percent in fiscal 2021 declined to 10.80 percent of GDP last fiscal.

In the early days of the Corona epidemic, consumers saved to be able to work in the crisis of employment and health. However, after the economy reopened, consumers began spending on essentials, which eroded their savings. Savings were also reduced due to the long-lasting effect on employment due to Corona.

There was an increase in costs due to earlier pending demand. The report quoted an economist as saying that people are spending money despite the absence of sufficient income and lack of sufficient job creation, which indicates that their savings will decrease.

The report also noted that the domestic savings ratio of GDP remained at a multi-year low of 2.50 percent. The share of insurance, provident and pension funds in the total financial savings of families increased to 40 percent.

A consultancy firm earlier said that high inflation was one of the reasons for the decline in domestic savings. It may be mentioned here that inflation in the country is running significantly higher than the Reserve Bank's maximum limit of 6 percent as a result of the continuously high prices of petrol and diesel.