This post is the third and final in a series of post that uses Consumer Pyramids Household Survey (CPHS) database maintained by the Centre for Monitoring Indian Economy (CMIE) to understand the financial choices of Indian households.
In the first post, we picturised the portfolios of Indian households as of 2019. We articulated our position on financial inclusion being much more than just bank account ownership and in fact relating to access to a wide range of financial services and products. We also articulated the need for formal financial services by households to fulfil life-cycle goals, such as managing risks, smoothening consumption, and investing in growth opportunities. The themes that emerged from our analysis were – the need for greater formalisation of financial services among Indian households, visibly large scope for diversification in households’ financial portfolios, and the urgent need for active use of risk mitigating and long-term savings products.
In the second post, we reviewed the spread of assets and liabilities of households across various states of India and found uneven rates of participation across various financial instruments. We found some of the northern and north-eastern states to lag severely behind the southern states in terms of participation across various formal financial products. We also found a positive correlation between the economic growth of states and household participation in formal financial services, barring a few outliers. This analysis allowed us to identify states with lower rates of participation in formal products and higher rates of participation in informal products of finance.
In this brief, we look at how the financial portfolios of Indian households have changed over time, specifically between 2014 to 2020. Throughout the analysis, we look for well-defined inflection points that may have led to changes in the Indian household portfolios. For instance, demonetisation (2016) is one such inflection point, which led to a huge shift in the way low-income households borrowed (Sane and Shah, 2020). The COVID-19 crisis also lay bare the structural problem with India’s financial landscape, amid exhausted policy tools (World Bank, 2020). We look for such variations in the data to study the changes in ownership of assets, savings, and borrowings of Indian households, hoping to identify areas of improvement in the Government’s financial inclusion policies. This analysis could hence be used to gauge and evaluate the progress of participation and use of formal finance by households in India. This study also highlights significant gaps in the access to financial services among low-income households over time.
To know more, please read our research brief on “Analysing Trends in the Financial Portfolio of Indian Households” here.
Cite this item
Agrawal, N., Ravi, H., & Sharma, M. (2021). Analysing Trends in the Financial Portfolio of Indian Households. Dvara Research.
Agrawal, Niyati, Harini Ravi and Misha Sharma. “Analysing Trends in the Financial Portfolio of Indian Households.” Dvara Research (2021).
Agrawal, Niyati, Harini Ravi, and Misha Sharma. 2021. “Analysing Trends in the Financial Portfolio of Indian Households.” Dvara Research.