Union Budget 2024: 48% households report decline in earnings & savings, hope FM to offer tax relief

Ahead of the Budget 2024-25, almost 48% households across the country have said that they are increasingly facing a decline in earnings and savings. The households said that they have been facing rising costs related to food, school education, rent, transportation, cost of electricity, etc., the basic expenses incurred by a middle-class family. The big concern is a declining earnings scenario for many and the need to dip into savings, ancestral property/land, or take loans, just to make ends meet, a survey conducted by research agency Local Circles revealed.

Net household savings in India declined sharply by Rs 9 lakh crore to Rs 14.16 lakh crore in the three years to 2022-23 (FY23). Overall, India’s household savings rate has fallen from 22.7% of GDP in FY21 to 18.4% in FY23, as per the National Account Statistics 2024 data released by the Ministry of Statistics and Programme Implementation(MoSPI).

Household savings had touched a peak of Rs 23.29 lakh crore in 2020-21, the year which saw the second wave of the Covid pandemic. Following that it has been on the decline. It then fell to Rs 17.12 lakh crore in 2021-22 and further to Rs 14.16 lakh crore in 2022-23.

In the last decade, the growth rate of financial liabilities, at 16.1% year-on-year, has exceeded that of gross financial assets, which averaged 10.8% year-on-year. Notably, in FY2022-23, there was a significant surge in financial liabilities, rising by 76% year-on-year, leading to a considerable decline in net financial assets.

The survey showed that while 48% of consumers surveyed believe their annual household earnings will reduce in FY 2024-25 in comparison to FY 2023-24, an equal percentage of consumers project that their average household savings will reduce in FY 2024-25 compared to the previous year. 15% households are projecting an over 25% dip in savings this year while 7% of them are projecting a 25% or higher drop in household earnings.

The survey was conducted with a significant sample size of 21,000 respondents from 327 districts across India. The respondents were divided into two categories, with 67 percent being male and 33 percent being female.

Moreover, the survey sample comprised residents from various areas, with 44 percent hailing from Tier 1 cities, 32 percent from Tier 2 cities, and the remaining 24 percent residing in Tier 3-4 cities and rural districts.

Further reduction in earnings

According to the findings from the recent survey, 48% of household consumers expect their average household savings to decrease in the fiscal year 2024-2025 compared to the previous fiscal year 2023-2024. This substantial proportion of households foreseeing a reduction in savings raises significant concerns about the prevailing financial circumstances.

It showed that the rising costs of living and expenses are outpacing income growth, forcing many households to deplete their savings. In more severe situations, families are resorting to measures such as leveraging their assets through mortgages, liquidating assets, or seeking personal loans to cover day-to-day expenses or fund their children's college education.

On asking about inflation, income and expenditure, around 10% respondents said their household savings will increase in the next 12 months (April 2024-March 2025), 10% indicated that it is “likely to increase but can’t say how much”, and 18% stated that it is “likely to stay the same”.

About 28% of respondents said the savings are likely to decrease by 0-25%, 15% indicated that it is likely to decrease by over 25%, and 5% indicated that the household savings are “likely to decrease but can’t say how much”. In addition, 4% of respondents did not give a clear response.

Many households are facing a significant financial strain due to the rising cost of living and other expenses. As a result, individuals are resorting to using their savings to manage their financial obligations. Some are even considering leveraging their existing assets through mortgages or liquidating them to fulfill their monetary requirements, as highlighted in the survey.

It was observed that the typical financial necessities of the surveyed households primarily revolve around covering daily expenses to sustain their livelihoods and supporting their children's higher education costs.