Reserve Bank of India Deputy Governor Michael Debabrata Patra said Tuesday that domestic savings have been the primary source of financing the country’s investment needs and will continue to be the main net lender for decades to come.
Speaking at the Financing 3.0 Summit: Preparing for Viksit Bharat, organised by the Confederation of Indian Industry (CII), Patra highlighted that household net financial savings have nearly halved from 2020-21 levels due to behavioural changes, including the unwinding of savings accumulated during the pandemic and a shift from financial to physical assets like housing.
Despite this, Patra noted that household financial assets have already begun to recover, increasing from 10.6% of GDP between 2011-17 to 11.5% between 2017-23, excluding the pandemic year.
He also pointed out that household physical savings have risen post-pandemic to over 12% of GDP and could increase further, having previously reached 16% of GDP in 2010-11.
Patra affirmed that households will continue to be the top net lenders to the economy in the coming decades. He also mentioned that the private corporate sector has reduced its net borrowings due to rising internal accruals and subdued capacity creation.
However, with a revival in the capital expenditure cycle, Patra expects an increase in corporate borrowing, primarily funded by households and external resources.
The deputy governor also addressed the public sector’s net dis-saving, noting it has moderated unevenly but will remain a net borrower due to the critical role of fiscal policy in India’s future.
He added that while domestic savings have mainly financed the nation’s investment needs, external financing plays a supplementary role, reflected in modest current account deficits.
Patra emphasised that as India’s productive capacity and ability to absorb foreign resources increase, external financing could undergo significant changes, but maintaining external debt sustainability will remain a priority.
CII Director General Chandrajit Banerjee, in his welcome address, praised the performance of India’s external sector and highlighted the RBI’s role in ensuring stable and sustainable financing aligned with national economic policies.
Banerjee also stressed the importance of greater investment in physical infrastructure, digital economy components, and emerging sectors such as renewable energy, warehousing, semiconductors, and data centres.
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