Households’ extra savings hit $300 bn after 2nd wave: UBS
NEW DELHI: Indian households during the two Covid waves since last year have ended up with an “extra savings” pile of as much as $300 billion, according to a report by UBS Securities India Pvt. Ltd.
Indians were expected to save around $200 billion for the 18-month period till the June 2021 quarter. However, overall savings stood at $500 billion.
As per the report, the slowdown in spending by households through the lockdowns last year resulted in $200 billion extra net savings.
“In our inaugural report, we quantified the ‘extra’ savings at $200 billion as of September 2020. While that had begun to unwind in subsequent quarters, second wave-related savings in the June 2021 quarter have led this ‘extra’ savings pile to rise to $300 billion,” said Sunil Tirumalai, equity strategist, UBS Securities India.
Overall, the financial net worth of households has grown by about $665 billion over the past 18 months to $3.01 trillion till the end of the June quarter.
According to the brokerage, nearly 75% of this surge came from incremental savings by Indian households, and the rest from mark-to-market gains, particularly in the past nine months.
According to the report titled India Market Strategy, the savings build-up during the June and September quarters of FY21 had begun to unwind in the December quarter in the form of higher consumption expenses during the festive season, a property sales spike and outflow from equities.
However, the second wave lockdowns in the June quarter of FY22 stopped this unwinding and led to another savings surge.
In its January note, UBS Securities India had said that Indian households’ savings surged in the form of cash and government claims such as national savings schemes, which include post office schemes and public provident fund.
As per the latest report, this trend continued in FY22. While flows into bank deposits were up 16% against the pre-pandemic run rate, flows into government schemes are up nearly 50% and cash withdrawals are up around 80%, as of June end.
“Despite an apparent spread of investing culture in recent quarters, we think these savings are generally concentrated among a few households: total unique individual investors in mutual funds are less than 24 million (less than 8% of Indian households),” the brokerage said.