Chennai: Household net financial savings as a percentage of GDP rate is likely to move up further in FY25 after inching up to 5.2 per cent in FY24. This is led by the dip in the growth of financial liabilities rather than increase in gross household savings.Household net financial savings rose marginally to 5.2 per cent in FY24 from 5 per cent in FY23.This growth is attributed to the significant drop in the growth in financial liabilities. Financial liabilities grew by 17.7 per cent in FY24 against 77.5 per cent in FY23. In the first half of FY25, household liabilities, like personal loans, fell to 4.7 per cent of GDP from 6.9 per cent during the same period in FY24. Further, household financial assets expanded in FY24.However, household gross savings was at a seven-year low of 18.1 per cent in FY24, having fallen from 18.6 per cent in FY23. In FY21, it stood at 22.7 per cent. The deterioration in household savings rate in FY24 stemmed from the dip in physical savings to 12.8 per cent of GDP from a decadal high of 13.4 per cent in FY23, finds ICRA.The uptick in household net financial savings that was recorded in FY2024, needs to pick up pace to support corporate capex.The National Statistical Office has pegged nominal private final consumption expenditure (PFCE) growth at 12.3 per cent in FY25, implying a significant uptick from the FY24 levels. A pickup in growth in PFCE in FY2025 could imply that the household savings rate is likely to have come under further pressure in the ongoing fiscal. However, ICRA expects PFCE growth in FY25 to be lower than expected.Looking ahead, PFCE growth is projected to be healthy in FY26 amid expectations of an improvement in urban demand. This, along with a likely recovery in housing demand, could weigh on household net financial savings in the next fiscal.
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