The household debt as a percentage of gross domestic product (GDP) may have declined to 34 percent within the half-moon of 2021-22, consistent with an estimate by the depository financial institution of India’s research report Ecowrap.
The COVID-19 pandemic has resulted during a spike in household debt to the GDP rate. As per the report, it rose sharply to 37.3 percent in 2020-21 from 32.5 percent in 2019-20.
“We estimate that household debt as a percentage of GDP has declined to 34 percent in Q1 FY22 with the commensurate rise in GDP within the half-moon , though it’s increased in absolute terms,” the research report released on Wednesday showed.
In absolute numbers, the household debt has increased to Rs 75 lakh crore within the half-moon of FY22 from Rs 73.59 lakh crore in FY21, it said.
It said the recently released India Debt & Investment Survey (AIDIS) report for 2018 showed a rise within the average amount of debt among rural also as urban households between 2012 and 2018.
The average amount of debt increased by 84 percent and 42 percent, respectively, for rural and concrete households for the six-year period ended 2018, the SBI research report said.
The state-wise trend indicates that the agricultural households’ average debt quite doubled in 18 states for the six-year period ended 2018, while seven states witnessed an equivalent for urban households.
Importantly, five states, including Maharashtra, Rajasthan and Assam, witnessed a simultaneous doubling in average debt across urban and rural households during this era , the report said.
As per the AIDIS report 2018, the typical amount of debt among rural households stood at Rs 59,748 and in urban households, it had been Rs 1.20 lakh.
“In 2021, the agricultural household debt is predicted to extend to Rs 1.16 lakh and concrete to Rs 2.33 lakh, indicating that COVID impacted the households significantly,” consistent with the SBI research report.
It said the debt-asset ratio, which is an indicator of household indebtedness, has increased to three .8 in 2018 from 3.2 in 2012 for rural households. For urban households, the ratio has risen from 3.7 to 4.4.
Kerala, Madhya Pradesh and Punjab were the three states that witnessed a deterioration of a minimum of 100 bps (basis points) in debt asset ratio over the six-year period ended 2018, the report said.
“The good thing is that in rural India, the share of outstanding cash debt from non-institutional credit agencies has declined significantly to 34 percent in 2018 from 44 percent in 2012,” it noted.
Notably, most states have registered a steep decline in non-institutional credit in rural areas, indicating the rise in formalisation of the economy, the report said.
The share of non-institutional credit has declined significantly within the case of Bihar, West Bengal , Rajasthan, Haryana and Gujarat. In Haryana and Rajasthan, which witnessed loan waiver schemes, the share of non-institutional credit declined contrary to popular perception, it said.
“This might be explained by a big increase in penetration of KCC (Kisan Credit Cards) in these two states. Our estimates show that the amount of KCC cards has jumped by 5 times over the 7 year period ended 2020,” the report said.
The report believes that the recent reforms in agriculture could further help within the formalisation of the economy, despite the political cacophony.
