The financial wealth of the Indian household increased significantly during COVID-19 when restrictions were put in place and people were able to save more. According to data from RBI’s Estimating the Financial Wealth of Indian Households report in July, household net financial wealth increased by 12.6 percentage points between March 2020 and March 2023. While household debt and financial assets remained almost the same, household equity investments increased 1.5 times in 11 years from 2011-12 to 2022-23.

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The study estimated this data using information from various regulatory bodies, including RBI, the Pension Fund Regulatory and Development Authority (PFRDA), the Insurance Regulatory and Development Authority of India (IRDAI), the Securities and Exchange Board of India (SEBI), the Association of Mutual Funds of India (AMFI), the Employees’ Provident Fund Organisation (EPFO), and the Controller General of Accounts (CGA).

Net wealth, the difference between total asset holding and liabilities over a period, is affected not only by savings and expenditures but also by holding gains, losses, and other changes. According to the report, the same applies to households’ wealth, which includes bank and non-bank deposits, public provident fund (PPF), national saving certificates (NSC), etc. While PPF is regarded as a deposit because it is a personal investment scheme, NSC is also considered a deposit instead of a debt security because it is a non-negotiable certificate.

EPFO is an employer-provided scheme, and thus, it is considered a pension scheme along with the National Pension System (NPS), Atal Pension Yojana (APY), and State Provident Funds (SPF) of the government, both central and state.

The data also included household investment in mutual funds and insurance from respective authorities. Investment in government securities like Sovereign Gold Bonds (SGBs) and treasury bills is considered debt securities.

Household Financial Wealth In India

The trend in household wealth shows growth in financial assets during the pandemic years, which normalised after the pandemic in 2022-23. Post-pandemic, there has been substantial growth in lending by banks and non-banks and only moderate growth in financial assets.

In short, the last decade saw deposits dominate total financial wealth, with an increased interest in equity instruments, insurance, and pension funds.

The growth of investment in equity and investment funds has been more than 50 per cent in the total financial wealth of households in almost the last 11 years to 2023.

Financial assets increased by Rs 123.2 lakh between the December quarter of 2019 and the March quarter of 2023. This growth was also due to increased savings and asset prices.

The report also highlights the growth in lending. Banks are the dominant lenders, occupying around 80 per cent of total household credit. Non-banking entities like non-banking financial companies and housing financial corporations have a remaining 20 per cent share but have been growing fast for the last few years, securing a 7.0 percentage point growth from 2012 to 2023.

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The report says that while household debt has increased, it has coincided with the growth in financial assets, and thus, the ratio of household debt to financial assets has remained almost range-bound and flat since 2011-12.

A significant change has occurred in the equity investment space, from 11.2 per cent of the total financial assets in March 2012 to 17.6 per cent in March 2023. The deposit share decreased from 51 per cent in March 2012 to 43 per cent in March 2023.

Net financial wealth, which was 85.7 per cent of the GDP in June 2011, rose to 106.8 per cent in December 2020 (the pandemic year). By June 2022, it was 99.2 per cent and 97.2 per cent by March 2023.

The report only considered listed equity and its growth, but there are also  17.1 lakh active private unlisted companies. In comparison, the listed companies were only 6,658 as of May 2024. According to the report, a significant portion of household investment in India goes to non-financial assets like gold, real estate, etc. Thus, a regular wealth survey can help estimate household wealth more accurately.

Another striking feature the report shows is that the Indian demographic structure currently has a significant young population that is also working. People in the workforce tend to save more than the elderly or the dependent. As per the report, as the demographic dividend matures, the youth population becomes old, and saving behaviours will also change.

As people reach their retirement age, their overall saving rate moderates.

So, while household net wealth in small saving deposits, pension funds, and equity investments has risen over almost a decade, a demographic change would impact the future.