India's household savings rate for FY25 is projected to be significantly higher, thanks to a revised methodology by the Securities and Exchange Board of India (Sebi) that offers a more comprehensive and accurate picture of investments through the securities market.
Key Points
- Sebi's revised methodology projects India's gross savings rate to be 47 basis points higher in FY25, reaching 34.94 per cent of GDP.
- Under the new framework, household savings to GDP ratio for FY25 is 21.7 per cent, an increase from the previous estimate of 21.23 per cent.
- The revised approach includes a broader range of financial instruments like equities, debt, REITs, InvITs, and AIFs, providing a more comprehensive coverage.
- The new methodology incorporates granular data from primary sources, enhancing data quality and accuracy in measuring household savings.
- Despite being net sellers of direct equity, Indian households are increasingly channelling savings into mutual funds, indicating a maturing investment approach.
India’s gross savings rate could be nearly 47 basis points (bps) higher in FY25 than previously estimated after the Securities and Exchange Board of India (Sebi) revised the methodology for calculating household savings routed through the securities market, according to a research paper released by the regulator.
The research paper, authored by officials from Sebi’s Department Economic and Policy Analysis (DEPA), notes that the rate of gross savings to GDP has increased to 34.94 per cent for FY25.
It would have been 34.47 per cent if the old methodology for computing securities market investments continued.
Impact of Revised Methodology
“Under the revised methodology, the household savings to GDP ratio for FY25 is 21.7 per cent compared to 21.23 per cent under the previous methodology.
Similarly, net household financial savings improved to 7.10 per cent of GDP, up from the former estimate of 6.63 per cent,” notes the paper.
The paper added that while the Reserve Bank of India (RBI) provides data on the stock of household financial assets in addition to the household savings, the current coverage is limited to mutual fund’s assets under management belonging to individual investors.
It excludes the significant volume of assets held by individuals across equities, debt, real estate investment trusts (Reits), infrastructure investment trusts (InvITs), and alternative investment funds (AIFs).
Broader Coverage and Accuracy
Under the revised approach, household savings routed through the securities market stood at Rs 6.9 trillion in 2024-25, compared with Rs 5.42 trillion under the earlier methodology.
“The inclusion of new instruments and segments has provided a comprehensive coverage and better captures the shift in household savings from traditional physical assets (gold and real estates) towards financial instruments,” it notes.
The paper also emphasises that the computation using actual granular data from primary sources gives a realistic picture of the household savings, ensuring enhanced data quality and accuracy.
The revised methodology includes granular data, incorporating secondary market in various segments, new-age assets like Reits, InvITs, AIFs, and non-profit institutions serving households in the investor category.
The national savings data published by the RBI and the Ministry of Statistics and Programme Implementation (MoSPI) relied broadly on estimations for savings via the securities market.
Maturing Indian Investor
“The most interesting part in this report isn't the headline. It is the fact that households were net sellers of direct equity to the tune of Rs 54,786 crore in FY25 — and Rs 69,329 crore the year before — even as they were record buyers of mutual funds.
"This is not a retreat. This is maturation.
"The Indian retail investor is booking gains on direct stockholdings and outsourcing fresh allocation to professional vehicles,” said Jimeet Modi, founder and chief executive officer (CEO), Samco Group.
