NEW DELHI: The beginning of the second wave resulted in sharp increase in household debts in the pandemic-stricken financial year 2020-21, which is indicating rise in debt stress and is a matter of concern, a report by State Bank of India (SBI) economists said on Monday.
According to the report, household debt as a percentage of gross domestic product jumped from 32.5% in FY20 to 37.3% in FY21, on account of the adverse financial impact caused by Covid-19 pandemic. The report added that the debt has been calculated after taking into account retail loans, crop loans and business loans from financial institutions like commercial banks, credit societies, non-banking financial companies (NBFCs) and household finance corporations (HFCs).
The beginning of the second wave resulted in significant deposit outflows from the banking system in alternate fortnights. However, the pace of these deposit outflows has moderated now.“Between March and December 2020, 599 districts saw an inflow of Rs 11,19,776 crore, while 113 districts saw an outflow of Rs 1,06,798 crore. This decline in bank deposits and the increase in health expenditure may result in further increase in household debt to GDP in FY22,” the SBI report said. The report said due to the increase in health expenditure, there is a need to support wage income.
“If we proxy employee expenses as wage income, as percentage of corporate gross value add for around 4,000 listed companies, it has come down to 30.6% in FY21 from 34.1% in FY20, even as their net income as percentage of corporate gross value add has significantly grown from 13.4% in FY20 to 23.7% in FY21,” the report added.