Covid, lockdowns add $200 billion to household savings

The pandemic-driven lockdown has a surprise winner in household savings that have been falling steadily between 2014 and mid-2019 but have scooped up a hefty USD 200 billion in extra savings - which is a 20-year high, according to a foreign brokerage report.

Surprisingly, a vast portion of this savings is in cash only, which soared by a whopping 135 per cent during the lockdown months, a report by UBS said, adding now household savings constitute as much as 58 per cent of the gross capital formation while that of corporates is only 32 per cent.

According to analysts at UBS Securities India Sunil Tirumalai and Dipojjal Saha, the slowdown in spending by the households through the lockdowns has resulted in USD 200 billion extra net savings in financial assets, which is as a percentage of GDP is close to the peak seen post-global financial crisis of 2008-09 and is still growing and is granular and broad-based, and not concentrated in the hands of the rich.

Bank deposits and insurance/pensions form 14 per cent each of the total household savings, while 19 per cent constitute claims on government and a whopping 135 per cent are in hard currency.

Overall financial surplus from households has remained steady for the last seven to eight years - before rising from mid-2019.