Household Wealth Dynamics: A Deep Dive into India's Financial Landscape

Deposits remain the top choice for saving in India, despite a rise in market-based instruments. The RBI's July Bulletin article analyzes household financial balance sheets and net financial wealth from 2011-12 to 2022-23, noting a significant increase due to the pandemic. Equity wealth and debt stability are also discussed.

Deposits continue to dominate as the preferred savings instrument in India, although market-based alternatives are making headway, according to the Reserve Bank's July Bulletin.

The article offers quarterly estimates of household financial balance sheets and net financial wealth for the period of 2011-12 to 2022-23.

Authored by Anupam Prakash, Suraj S, Ishu Thakur, and Mousumi Priyadarshini from the RBI's Department of Economic and Policy Research, the article highlights a surge in financial assets and net financial wealth in 2020-21, driven by pandemic-related restrictions on spending and mobility. This trend has since normalized as household consumption levels rose with the return of normalcy.

As of end-March 2023, households' financial assets accounted for 135.0% of GDP, with financial liabilities at 37.8% of GDP, placing net financial wealth at 97.2% of GDP.

Despite the spike during the pandemic, the listed equity wealth of households reached its peak at 19.4% of GDP by end-December 2021, before moderating to 14.9% of GDP by end-March 2023. The report is limited to listed equities due to the lack of data on unlisted investments.

The article also points out that while household leverage has increased, the debt-to-financial assets ratio has stayed stable.

Notably, a significant portion of wealth in India remains tied in non-financial assets like housing, which were not included in this analysis. The views expressed are those of the authors and do not necessarily reflect the RBI's stance.