Do it yourself

In recent times, one of the most extrapolated data by the market participants in India has been the household participation in the capital markets. Several research papers/reports have highlighted the relatively low deployment of the Indian household savings into the capital market, especially listed equity shares, to argue for a high growth potential in this area. In fact, capital market related stocks like brokerages, AMCs, depositories, exchanges and transfer agents & registrars, have been outperforming the broader markets for the past few years. Impressed by the trend, NSE has even launched an index (Nifty Capital Market index) to capture the performance of this sector. Indubitably, the Indian capital markets are at the threshold of a major transition. Acceleration in institutionalization of household participation has been a major trend in the past five years. Access to banking and financial markets has improved materially with the advancement of technology and digitalizatio...

The latest edition of the Handbook on Indian Statistics released by the Reserve Bank of India (RBI) depicts some interesting trends in domestic savings. Gross Domestic Savings (GDS), which was recovering steadily post demonetization, has again declined post Covid. However, the decline since FY17 is entirely due to lower savings in the corporate sector. The household savings have actually risen sharply, especially during Covid. Contrary to popular perception, the Indian households are allocating much less to the capital market products (shares and bonds) post Covid. Even contributions to the provident funds have declined materially, indicating lower employment in the organized sector. Bank deposits have seen an increase. The contribution of Indian households to Investments (Gross Capital Formation) is stable at the elevated levels seen post demonetization, implying a rising trend towards self-employment. Key trends ·           Gross Domestic S...

 A literal interpretation of the latest statistics would indicate that Indian economy is passing through a recession and faces a specter of stagflation. A young demography like India can certainly not afford this condition. The government officials have termed the recession as a “technical” one, induced temporarily by the total lockdown imposed in the wake of the outbreak of Covid-19 pandemic. The economic managers of the government have also vehemently denied any possibility of Indian economy slipping into a stagflationary trap. In my view, however, this entire discussion based on official statistics might be “technical” in nature. Wandering through the streets of large cities and fields in the hinterlands over past few months, and interacting with people from various strata of the society, I am convinced that more than two third of Indian population may already be trapped in the stagflationary conditions, with their real income stagnant or declining over past few years and es...

Recently updated national account statistics highlights many interesting and noteworthy trends relating to household economics, especially consumption, investments and savings at the household level. The data also highlights the impact of demonetization on the household economics that may be the key to the understanding of current economic slowdown. Some of the noteworthy trends in household savings are as follows: (a)    Overall household savings have shown a declining tendency in past one decade. From a recent high of 24.3% of GDP in FY13, these have declined to 22.3% in FY18. (b)    Gross financial savings have recorded significant increase in the past few years. From 10.7% in FY12, gross financial savings had increased to 14.2% in FY18. The trend in Net Financial Savings has been little weak though, reflecting the rise in financial liabilities at household level, which have risen from 3.3% of GDP in FY12 to 5.6% of GDP in FY18. This h...