Home >Economy >Household debt jumps to 37.3% of GDP in 2020-21, says SBI report

The COVID-19 pandemic has resulted in a spike in the household debt to GDP ratio. As per SBI estimates, it rose sharply to 37.3% in 2020-21 from 32.5% in 2019-20 (BIS estimates are at 37.7% as of Dec’20). The report confirms the deeper impact of the Covid-19 pandemic. “We estimate that household debt as a percentage of GDP has declined to 34% in Q1FY22 with the commensurate rise in GDP in Q1, though it has increased in absolute terms. We project that household debt in rural and urban areas might have doubled in 2021 from the 2018 levels,"the report states.

The recently released India Debt & Investment Survey (AIDIS) report for 2018 shows an increase in the average amount of debt among rural as well as urban households, with the average amount of debt increasing by 84% and by 42% respectively for rural and urban households for the 6 year period ended 2018. 

The report has been authored by Dr. Soumya Kanti Ghosh, Group Chief Economic Adviser, State Bank of India.

“The state-wise trend indicates that the rural households’ average debt more than doubled in 18 states for the 6 year period ended 2018, while 7 states witnessed the same for urban households. Importantly, 5 states, including Maharashtra, Rajasthan and Assam witnessed a simultaneous doubling in average debt across both urban and rural households during this period," the report adds.

According to the report, the good thing is that in rural India, the share of outstanding cash debt from non-institutional credit agencies has declined significantly to 34% in 2018 from 44% in 2012. Notably, almost all states have registered a steep decline in non-institutional credit in rural areas, indicating the increase in formalisation of the economy. The share of non-institutional credit has declined significantly in the case of Bihar, West Bengal, Rajasthan, Haryana and Gujarat. Even in Haryana and Rajasthan that witnessed loan waiver schemes, the share of non-institutional credit declined contrary to popular perception.

“This could be explained by a significant increase in penetration of KCC cards in these 2 states. Our estimates show that the number of KCC cards has jumped by 5 times over the 7 year period ended 2020. For the record, Haryana and Rajasthan did witness an average increase of 9%!," Dr. Soumya Kanti Ghosh said.



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