We have highlighted in several notes that with weak income growth, strong consumption and investments (real estate) could be supported iff HHNFS was much lower in FY23. Our forecast was 6% of GDP, and RBIs estimate says it was even lower.
Nikhil Gupta,
Chief Economist, MOFSL Group
FY22 NFS was also revised down to 7.2% of GDP (close to our estimate of 7%)
We have highlighted in several notes that with weak income growth, strong consumption and investments (real estate) could be supported iff HHNFS was much lower in FY23. Our forecast was 6% of GDP, and RBIs estimate says it was even lower.
Further, in line with our estimates, HH annual liabilities increased by 5.8% of GDP last year (our estimate was 5.7%) the second highest annual flow post-independence (6.7% of GDP in FY07).
Accordingly, HH debt was 36.9% of GDP in FY22 (revised up from 35.6%), which increased to 37.6% of GDP in FY23.
Overall, this combination of weak income growth and falling HHNFS (led by higher borrowings) is highly unsustainable, which is why we believe that consumption growth is unsustainable. Whether it will be substituted by investments is not our base case, though the jury is still out.
