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A serious economic repercussion of Covid-19 has been forced consumer savings due to physical lockdowns.
According to the Reserve Bank of India, household net financial savings (NFS) stood at 21.4% of gross domestic product in Q1 FY21 and 10.4% of GDP in Q2 FY21, compared with 7–8% of GDP in the pre-Covid-19 period.
When we replicated the RBI’s methodology (as far as possible with information publicly available), we found household NFS had fallen to 8.4% of GDP in Q3 FY21.
Nevertheless, financial savings account for just 35–40% of household savings in India.
A comparison with other large nations reveals household savings (as % of GDP) have increased across countries.
However, the rise in household savings in India in 2020 (equals to 1.1 times of 2019 levels) was the slowest vis-a-vis other nations (savings were as high as 5.4 times in Japan).
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