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MOSL: ECOKNOWLEDGE: Understanding Indian household balance sheet – Part I

ECOKNOWLEDGE: Understanding Indian household balance sheet – Part I

 

• Households are, by far, the largest participant in any major economy, accounting for the majority of a nation’s GDP. In Part I of the III-part series, we delve deeper into understanding Indian household balance sheet, which accounts for ~70% of GDP (including investment spending). Our calculations suggest that personal consumption expenditure (PCE) growth will have to pick up from a three-year low of 6.6% YoY in FY18 to a seven-year high (since when the new series began) of ~8% to help GDP grow ~7% in FY19.
• Over the past five successive years between FY14 and FY18 (estimated), personal consumption expenditure (PCE) has outgrown personal disposable income (PDI). Not surprisingly then, household savings have fallen from 29% of PDI (USD431b) in FY12 to as low as 21% (USD370b) in FY17 (from ~24% of GDP in FY12 to 16.3% in FY17).
• Households didn’t have to rely initially on debt to support higher consumption growth, and thus, their debt (institutional and non-institutional) hovered around 42% of PDI between FY09 and FY15. However, over the past three years, the combination of higher debt and weak income growth has pushed the ratio to ~48% (USD950b) in FY18.