Second Covid wave upped household debt stress: SBI report

SBI report says various indicators show improvement in economic activity in June.

1 min read . Updated: 05 Jul 2021, 12:18 PM IST Livemint( with inputs from ANI )

Household debt has sharply increased to 37.3 per cent of GDP in FY21 from 32.5 per cent of GDP in FY20, says SBI report

Mumbai: The beginning of the second Covid-19 wave has resulted in significant deposit outflows from the banking system in alternated fortnights, the pace of which has now again moderated, according to a new report from State Bank of India's (SBI's) economic research department.

It said one of the worrying features is rising household debt stress. Household debt -- after taking into account retail loans, crop loans and business loans from financial institutions like commercial banks, credit societies, NBFCs and HFCs -- has sharply increased to 37.3 per cent of GDP in FY21 from 32.5 per cent of GDP in FY20.

"The decline in bank deposits in FY21 and concomitant increase in health expenditure may result in further increase in household debt to GDP in FY22," said the report.

India’s household debt to GDP ratio is still lower than other countries, though we need to supplement wage income as a percentage of GDP that has been declining. If we proxy employee expenses as wage income, as % of corporate GVA for our sample of 3973 listed companies, it has come down to 30.6% in FY21 from 34.1% in FY20

However, said the report, various indicators show improvement in economic activity in June. SBI business activity index shows significant improvement in activity since May-end with the latest reading for the week ended June 28.

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