India's savings rate has surpassed the global average as financial inclusion has shot up in the country, with over 80 percent of adults now having formal financial accounts, according to an SBI report released on Monday.
The current savings rate stands at 30.2 percent, higher than the global average of 28.2 percent. This figure is significant as it reflects the positive impact of various measures taken to promote financial inclusion.
"Due to various measures, India’s financial inclusion improved significantly and now more than 80 per cent of adults in India have a formal financial account, compared to about 50 per cent in 2011, which is improving the financialisation of the savings rate of Indian households," the SBI report notes.
The share of net financial savings from total household savings has also seen tremendous growth. It increased from 36 percent in FY14 to about 52 percent in FY21; though, this growth trend appears to have decelerated during FY22 and FY23.
Interestingly, FY24 trends indicate another decline, this time with physical savings once again starting to drop. This shift signals changing preferences among savers, as more and more individuals explore alternative pathways for their finances.
Among financial savings, the share of bank deposits and currency is witnessing a decline as new avenues such as mutual funds gain popularity and attract investments. Over the past decade, funds mobilised by Indian companies from capital markets have increased more than ten-fold; from ₹12,068 crores in FY14 to approximately ₹1.21 lakh crore by FY25 (until October).
This suggests not just growing confidence among investors, but also showcases households increasingly participating in the capital needs of the country. Savings of households invested in shares and debentures have increased to around 1 percent of GDP as of FY24, up from just 0.2 percent five years prior.
The SBI report reports notable engagement with capital markets; by FY25 (till October), ₹1.21 lakh crore was raised from equity markets across 302 issues. Interestingly, regional data reveals differing contributions, with the Western region showcasing higher activity both in terms of quantity and financial value compared to regions like Central India, which amounts to less than 3 percent.
This trend presents a fascinating glimpse at how truly interconnected India’s financial system is becoming, driven by increased financial literacy and access to financial services. With over 80 percent of the adult population now engaged with formal financial accounts, the future of India’s savings strategy looks poised to continue its upward momentum.
The discussion around household savings, investments, and financial health is not just significant on individual levels but plays a pivotal role on national scales. It shows how financial inclusion can empower households to take control of their finances, thereby enhancing the overall economic stability of the country.
Such statistics not only reflect the current scenario but also shed light on the potential for future growth, highlighting the importance of sustained efforts to promote financial products and services across diverse populations.
