Domestic Savings to Drive India's Future Economic Growth: RBI Deputy Governor

RBI Deputy Governor Michael Debabrata Patra emphasized the critical role of domestic savings in financing India's economic growth at the 'Financing 3.0 Summit.' Net financial savings of households have nearly halved from 2020-21 levels due to shifts towards physical assets. Despite this, rising incomes are expected to boost financial assets, rendering households the primary net lenders to the economy. Meanwhile, corporate borrowing is set to rise with the capex cycle revival.

Reserve Bank Deputy Governor Michael Debabrata Patra on Tuesday emphasized the pivotal role of domestic savings in meeting India's investment needs, declaring it the principal net lender in the foreseeable future.

During a keynote address at the Financing 3.0 Summit hosted by the Confederation of Indian Industries (CII), Patra highlighted a significant behavioral shift among households. The net financial savings of households have almost halved from the 2020-21 levels due to a move from financial to physical assets, such as housing. Despite this, households have shown a tendency to rebuild financial assets thanks to rising incomes, indicating an ongoing process that has already begun.

Patra noted that although the private corporate sector has reduced its net borrowings, a resurgence in the capital expenditure cycle would see an increase in borrowing requirements, which are expected to be met by households and external resources.

(With inputs from agencies.)