NEW DELHI: The Covid pandemic has increased the debt burden of both rural and urban household, and in 2021, the rural household debt is expected to increase to Rs 1.16 lakh and urban to Rs 2.33 lakh, says a latest report from the State Bank of India.
“We estimated the 2021 rural and urban household debt to track the impact of Covid-19 on the households. In 2021 the rural household debt is expected to increase to Rs 1.16 lakh and urban to Rs 2.33 lakh, indicating that Covid impacted the households significantly,” a report, authored by Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI said.
The recently released India Debt & Investment Survey (AIDIS) report for 2018 shows increase in 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.
As per the AIDIS report 2018, the average amount of debt among rural households is at Rs 59,748 and in urban households is Rs 1.20 lakh, highlighting that five states, including Maharashtra, Rajasthan and Assam, witnessed a simultaneous doubling in average debt across both urban and rural households during this period.
According to SBI Ecowrap, the Covid-19 pandemic has resulted in spike in household debt to GDP rate.
“As per our estimates, it rose sharply to 37.3% in 2020-21 from 32.5% in 2019-20. 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,” It added.
Ghosh also said that despite the “political cacophony”, the recent reforms in Agriculture could further help in formalisation of the economy.
“However, there is still a fundamental reform pending that is in the realm of RBI. This is making Agriculture Cash-Credit at par with other segments,” Ghosh added.