The latest issue of Sarvekshna (March 2022), the periodic journal of National Statistical Office (NSO), presents some important insights into assets and indebtedness of the Indian households. Some of the data is actually contrary to the popular perception. I find this data important since it defines the limits of potential domestic inflows into the financial markets; and the challenges the household face in a persisting negative interest rate environment.
The key highlights of the NSO presentation are
as follows:
Asset ownership pattern
·
96.6% of Rural households own
some financial asset. This percentage is lower (94.7%) in case of urban
households.
·
Average value of financial
assets held by a rural household in India is around INR73,000. For an urban
household, this value is much higher at INR2,52,000.
·
About 91% of rural households
asset value comprises of land and building (69% land and 22% building).
For an urban households this proportion is not very different at 87% (49% land
and 38% building).
·
Rural household have put 5% of
their asset value in Deposits; whereas for urban household this
percentage is much higher at 9%.
·
Other assets comprising livestock, vehicle, agriculture machinery/business
equipment and shares comprise 4% of assets for both rural and urban
households.
·
In rural areas, cultivator
households’ average asset value is INR2.2million; while non cultivator
households own much less at INR0.8million.
·
In urban areas, self-employed
households own INR4.1million worth of assets; whereas for the other households
this value is much lower at INR2.2million.
·
The average value of assets
owned by the poorest 20% of urban (INR0.96million) and rural (INR0.76million)
households is not much different. But for other quintiles the average value of
assets owned by the urban households is almost twice as much as the rural
households.
Indebtedness
·
35% of rural households have
some cash loan outstanding; whereas only 22% of urban households have
outstanding loans.
·
Average outstanding debt of a rural household is INR59748; whereas for an urban household
the amount is twice as much at INR120,336.
·
More Cultivator households
(40.3%) and self-employed households (27.5%) have some debt outstanding as
compared to non-cultivator (28.2%) and other urban households (20.6%).
Obviously, there is a strong correlation between asset ownership and
indebtedness. It would be interesting to find the cause-effect relationship
between debt and assets.
·
Andhra Pradesh and Kerala are the
most indebted states. Delhi and Meghalaya the least.
·
The debt to asset ratio
for rural households (3.8%) and urban households (4.4%) is extremely low by
global standards.
Inference
·
The preference for land and
building ownership continues to be high across the country.
·
Financial assets (other than
deposits) constitute miniscule part of total assets for both rural as well as
urban households.
·
More rural households have debt
outstanding. The households owning more assets have more debt outstanding.
·
Much more urban households
prefer deposits to shares and mutual funds than rural households.
·
Theoretically the potential for
growth of household credit and household investment in mutual funds and shares
is immense. But over the past 32yrs of reforms, this potential has remained
just that. Hardly any change is visible in the household preference for
financial assets (non deposit) over physical assets.
·
Gold does not figure separately
in the asset ownership pattern. It is part of the 4% “Other Asset” bucket that
includes personal vehicle, shares & MFs, business/agriculture machinery
etc.
