India’s Household Savings Drop: A Closer Look

Household Savings Hit a New Low

India’s household savings have dropped to a new low. They now make up just 18.1% of GDP in FY24. This is the third year in a row that savings have fallen, according to a report by CareEdge Ratings.

Increasing Household Debt

On the other hand, household debt has risen. It now stands at 6.2% of GDP. This is almost twice as much as it was ten years ago. The report shows that more Indians are borrowing to meet their everyday needs.

Decline in Gross Domestic Savings

The report also points to a wider dip in gross domestic savings. These savings dropped to 30.7% of GDP in FY24. This is down from 32.2% in FY15.

Rural India Shows Promise

Despite the worrying decline in savings, the report notes a more promising outlook in rural India. Here are some key points:

• Wage growth for rural male workers rose 6.1% year-on-year in February.
• This marks the fourth straight month that earnings outpaced rural inflation.
• Easing food inflation and healthy agricultural prospects are helping boost rural consumption.

Optimistic Outlook

CareEdge said in the report, “Going ahead, RBI policy rate cuts, lower tax burden, and continued easing of price pressures remain key tailwinds for the broad-based demand recovery.”

Consumer Confidence

Rural consumer confidence is showing cautious optimism. It is holding steady near the neutral 100 mark. Meanwhile, urban consumer sentiment remains subdued. However, expectations for the year ahead remain hopeful across both rural and urban households.

Corporate India and Cost Control

The report also highlighted a broader trend of cost control in corporate India. For instance, labor cost growth in major IT firms has dropped. It went from a high of 26% in Q3 FY23 to just 4% in Q3 FY25. This points to continued efforts at cost rationalization.

Inflation and Economic Growth

On the inflation front, there’s more good news. India’s retail inflation, measured by the Consumer Price Index (CPI), fell to 3.2% in April 2025. This is the lowest since August 2019. However, prices of essentials such as edible oils (up 17.4%) and fruits (up 13.8%) remain high.

A strong Rabi harvest, healthy water reservoir levels, and forecasts of an above-normal monsoon are expected to help stabilize food prices further.

As per government data, the Indian economy grew by 6.5% in real terms in FY25. This signals resilience despite pressures on household balance sheets.