The covid-19 pandemic and its economic impact have taken a toll on businesses, jobs and incomes across socioeconomic sections, forcing almost everyone to take stock and reconsider their financial plans. Recent surveys by BankBazaar and IndiaLends showed that Indians are worrying about their financial future and focusing more on savings. Now another survey titled PayNearby India Savings Behaviour, conducted with 10,000 participants from low-income groups, has revealed that 55% of that section of the population is also keen to save more to manage covid-19-like situations in the future.
But the PayNearby report showed that while the impact is across the board, those in the lower-income group are at an added disadvantage because of the lack of financial literacy. Here's what the data showed about how different economic sections have been affected.
Focus on savings
BankBazaar surveyed 1,112 customers on the impact of covid-19 on their personal finance management and published the results in a report called MoneyMood Covid Edition. The survey showed that people have become more conservative when it comes to their financial priorities, with discretionary spending falling and saving, investing and loan repayment rising to the top of the list. When asked what would be their topmost financial priority after the pandemic, 52% said saving, investment and debt payment, 24% said household expenses, utilities and education; and 13% said healthcare and insurance.
The IndiaLends survey corroborated this, showing that 82% of Indians are bearing the financial brunt of covid-19. Of the 5,000 respondents, 94% of the respondents said they would have to be extra careful about how they spend their money in the next few months; 84% said they were cutting back on spending, and 90% expressed concerns about their savings and financial future.
While all sections have taken a hit, perhaps the worst affected are those in the low-income bracket. A recent report by CreditVidya revealed that while the income of the mid-market segment was hit by 17%, and the affluent segment's income suffered the least staying 10% below the pre-covid levels, incomes of the mass-market or low-income segment (those with an income below ₹20,000) were hardest hit, remaining 37% below the pre-covid levels.
Another survey conducted by Generali, an Italy-based global insurance and asset management company, showed that close to 80% of the working class in India experienced loss of income and over 90% of them are preparing for more hardship in the future.
At a disadvantage
Aside from the more significant impact on their finances, Indians with lower incomes are at a further disadvantage because of the lack of financial inclusion and awareness, which means they aren't able to use as many resources when it comes to saving and investing.
According to the PayNearby survey, while over 80% of Indians have bank accounts, more than 70% of the people in the low-income group still avail informal arrangements such as chit funds and cash to park their savings. The key reasons for this are lack of awareness, tech intimidation and accessibility challenges of formal financial systems, the report stated.
Of the respondents, 47% said that flexibility in tenure and amount to be invested are crucial factors, and 65% said they shied away from saving through formal mechanisms as they were unable to maintain regular cash flows. More than 40% of the respondents cited fear of documentation and processes being a primary reason for not choosing a formal savings product.
In light of the sheer number of people who have been financially impacted by the pandemic and the lack of financial literacy among many of them, Anand Kumar Bajaj, MD and CEO of PayNearby, said that there is a dire need for simplifying financial products to bridge the gap.
"The ongoing pandemic has completely disrupted the global economy and has predictably hit those at the bottom of the pyramid the hardest. Inculcating saving discipline among communities is the key to a progressive economy. There is a need to simplify savings products, both in their nature and the manner in which they are offered," he said.
Financial literacy and inclusiveness can help combat the devastating effects the pandemic has had on the earnings and savings on the better part of the population. But the process of spreading awareness itself can be a challenge right now given the covid-19-related circumstances.