India’s household savings have continued to decline for the third straight year, according to CareEdge Ratings. In financial year 2024 (FY24), household savings slipped to 18.1 per cent of GDP. The report highlighted that gross domestic savings also fell to 30.7 per cent of GDP in FY24, compared to 32.2 per cent in FY15. Meanwhile, household financial liabilities surged to 6.2 per cent of GDP, nearly doubling over the past decade. This sharp increase in liabilities reflects growing dependence on credit to meet rising consumption needs. The trend signals a significant shift in the financial behaviour of Indian households.
Rural Demand Shows Signs Of Recovery
Despite the decline in savings, CareEdge Ratings pointed to positive trends in rural India. Wage growth for rural male workers rose by 6.1 per cent year-on-year in February, comfortably outpacing rural inflation for the fourth consecutive month. The report noted that easing food inflation and favourable agricultural prospects are supporting rural demand recovery. Rural consumer confidence is hovering around the neutral 100 mark, suggesting cautious optimism. In contrast, urban consumer confidence remains in pessimistic territory, although expectations for the coming year remain positive across both rural and urban regions, the report added.
The CareEdge report also observed a slowdown in labour cost growth in India’s major IT firms. Labour costs rose just 4 per cent in Q3 FY25, a sharp decline from the 26 per cent peak in Q3 FY23. This trend reflects broader cost rationalisation efforts across the corporate sector. As companies actively manage expenses, the impact on hiring and wage increments could influence overall consumption patterns in urban areas. The report emphasised that these corporate adjustments are part of a wider economic recalibration in response to evolving domestic and global conditions.
Inflation Eases, Economic Growth Holds Steady
India’s Consumer Price Index (CPI) inflation eased to 3.2 per cent in April 2025, the lowest level since August 2019. However, high prices of edible oils (17.4 per cent) and fruits (13.8 per cent) continue to support overall food inflation levels. The report highlighted that the upcoming Rabi harvest, healthy reservoir levels, and forecasts of above-normal monsoon rains are expected to stabilise food prices further. CareEdge noted that potential RBI policy rate cuts, a lower tax burden, and sustained easing of price pressures could drive broad-based demand recovery. The Indian economy recorded a growth of 6.5 per cent in real terms in FY25, according to government data.
(With Inputs From ANI)
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