Evolution in Household Financial Savings
A recent analysis by BofA Securities highlights a significant shift in the saving patterns of Indian households, with a noticeable drift from traditional bank deposits toward capital markets. Over the past two decades, the landscape of financial savings has transformed: while bank deposits accounted for 39% of total financial savings in FY2001, by FY2023, this figure slightly decreased to 37%. Conversely, investments in capital markets have seen a gradual increase, rising from a modest 4% to 7% in the same period.
Diversification Towards Insurance and Pensions
The evolution in saving preferences isn’t just limited to capital markets. There’s also been a substantial increase in allocations towards life insurance and provident and pension funds. From comprising 34% of the financial savings in FY2001, these sectors have grown to represent 40% by FY2023. This diversification is largely attributed to heightened financial literacy among the populace, enabling more informed decisions about secure, long-term financial planning.
Trends and Projections in Physical Savings
Despite the growth in financial asset accumulation, physical savings still play a crucial role in household economies. The proportion of physical savings oscillated, peaking at 61% in FY22 after a decline in previous years. This resurgence underscores the enduring value placed on tangible assets like real estate and gold, which continue to be perceived as safe havens amidst economic fluctuations. As of FY23, projections indicate an uptrend in physical savings, suggesting a robust inclination towards tangible asset accumulation in response to prevailing economic conditions.