Indian households curtailed spending due to the uncertainty caused by the COVID-19 pandemic and subsequent lockdown, which led to an additional savings of USD 200 billion, a report by UBS has said.
The increase in savings was visible across economic strata, UBS financial savings and wealth tracker research said.
"The slowdown in spending by Indian households (HH) through the lockdowns has resulted in $ 200 billion 'extra' net savings in financial assets-and as a percentage of GDP closest of the peak seen post-GFC (and still growing)," it said.
The overall quantum of savings has been rising since 2019 and surged in 2020, peaking in June, but still higher than pre-COVID levels, UBS said.
"This, coupled with a steady drop in HH borrowings (flow) since the ILFS crisis has meant that net financial surplus from HHs is almost at a two-decade high. As a result, stock of savings (wealth) is also close to multi-decade highs-with negligible help from asset appreciation (and hence not linked to market variations)," it added.
The increase in savings is expected to benefit the economy as Indians are also the least leveraged in the world. Many businesses are set to see improvement from 2020 levels in the coming quarters, with B2C (business-to-consumer) businesses set to benefit the most.
"Given the nature of savings (granular and broad based), we believe beneficiaries could be across consumption (discretionary and staples, autos) and financials (opportunities for retail lending)," the report said.