Household Savings Rebound; India Poised for Top Growth in FY26: RBI

India’s household financial savings rose to 5.1% of the gross national disposable income (GNDI) in 2023–24, marking a recovery from the multi-year low recorded the previous year, according to the Reserve Bank of India’s (RBI) Annual Report for 2024–25. The rebound is attributed to a favourable economic outlook and easing inflation. The report also expressed optimism that retail inflation will align with the RBI’s 4% target over the next 12 months.

"The favourable inflation outlook and moderate economic growth call for a monetary policy that supports growth while staying alert to the rapidly changing global macroeconomic environment," the report stated.

Gross domestic savings remained stable at 30.3% of the gross national disposable income (GNDI) in 2023–24, primarily due to a reduction in the general government’s “dissaving”. During the same period, household gross financial savings increased to 11.2% of GNDI, up from 10.7% in 2022–23, while household liabilities rose to 6.1%. Consequently, net household financial savings improved to 5.1%, compared to 4.9% in the previous year.

The report noted that "the savings-investment gap narrowed during 2023–24," attributing this development to a lower drawdown by the general government, weaker investment demand from households and non-financial corporations, and a slowdown in savings by financial corporations.

Economists anticipate a further rise in net financial savings in 2024–25. Soumya Kanti Ghosh, Group Chief Economic Adviser at the State Bank of India, projected that household sector net financial savings, the primary funding source for both the general government and non-financial corporations, could reach ₹22 trillion, or 6.5% of GNDI, in 2024–25. This would mark an increase from 5.1% in the current year and 4.9% in 2022–23.

“This growing capital pool remains crucial for funding government and corporate deficits and supporting macroeconomic stability,” he said.

Although the economic outlook remains favourable, the RBI warned of potential risks arising from evolving global macroeconomic conditions. For 2025–26, the annual report noted that markets will be closely monitoring the impact of U.S. tariff policies and any reciprocal actions taken by other countries.

The report stated that the Indian economy is set to maintain its status as the fastest-growing major economy in 2025–26, driven by a rebound in private consumption, strong balance sheets of banks and corporations, favourable financial conditions, and the government’s ongoing focus on capital expenditure.

The RBI has projected headline inflation at 4% and GDP growth at 6.5% for 2025–26. Since February, the Monetary Policy Committee has cut the policy repo rate by a total of 50 basis points and adopted an accommodative stance in April, highlighting its continued emphasis on supporting economic growth.

However, downside risks persist. The report highlighted potential threats to growth stemming from global trade disruptions caused by protectionist policies, prolonged geopolitical tensions, and financial market volatility. It also warned that these same factors could pose upside risks to inflation.

The report stated, "Looking ahead, easing supply chain pressures, declining global commodity prices, and anticipated higher agricultural output supported by an above-normal southwest monsoon and elevated reservoir levels bode well for the inflation outlook in 2025–26."

Regarding the external sector, the report stated that a strong outlook for India’s services trade balance and inward remittance receipts is expected to help keep the current account deficit (CAD) well within sustainable limits during 2025–26. Additionally, the inclusion of Indian sovereign bonds in global bond indices and the increase in the FDI cap in the insurance sector from 74% to 100%, as announced in the Union Budget 2025–26, are likely to boost foreign investment inflows.

The report noted that India’s banking sector remains resilient, but global uncertainties highlight the need for proactive risk management. It emphasised that, given the dynamic nature of interest rate risk, banks must manage both trading and banking book risks carefully, particularly because of the moderation in net interest margins (NIM).

The RBI report also noted that despite some moderation, non-banking financial companies continue to rely heavily on banks for funding, highlighting the need to diversify their sources of finance. It added that a scale-based regulatory framework is expected to enhance governance and risk management further.

Also Read: RBI Bulletin Highlights India’s Economic Resilience Amid Fragile Global Growth Outlook