Good news! At under 10% of GDP, household debt in India not alarming

The household debt is low and stagnant during the past few years hovering around in the range of 9-10 per cent of GDP.

The household debt in the country is not increasing and there is no cause for any concerns over it: Reports. Image Source: Reuters

At a low under 10 per cent of GDP, the household debt in the country is not increasing and there is no cause for any concerns over it, says a report.

"There has been of late a lot of brouhaha over the increasing household leverage in the country. However, such fears are largely unsubstantiated by hard facts which is only 9-10 per cent," SBI Research said Thursday.

Though it is true that the household savings rate has declined to 30 per cent in FY17 from a peak of 36.8 per cent in FY08, it is wrong to conclude that this has led to a surge in household debt," it added.

The household debt is low and stagnant during the past few years hovering around in the range of 9-10 per cent of GDP, it said.

The report explained that the problem in the household debt composition is of debt structure, pointing out that non- institutional sources like landlords, money lenders and friends and relatives still play an important role in financing household debt.

Credit from institutional sources accounted for only 3.72 per cent of the overall household debt to GDP of 9.89 per cent, while the rest 6.17 per cent came from the non- institutional sources, it said.

In what can be seen as a positive news, it said the real debt for households is stagnant. In FY18, household financial liabilities increased to 5.63 per cent from 3.33 per cent, suggesting partly the large scale opening of the Jan- Dhan accounts thus changing financial behavior of households.

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