According to the All India Credit and Investment Survey, the average debt of rural households increased from Rs 32,522 in 2012 to Rs 59,748 by June 2018, while that of urban households increased by 42% to a little over Rs 1.20 lakh in the same period.
There has been a rapid increase in the number of indebted households in rural India, with average debt increasing by 84% between 2012 and 2018, and the COVID-19 pandemic further doubling all household borrowings by 2021.
According to the All India Credit and Investment Survey (AIDIS) conducted by the National Statistical Office (NSO) in 2019, the average debt of rural households increased from Rs 32,522 in 2012 to Rs 59,748 as of June 2018, while the average debt of urban households increased by how much A little over 42% ₹ 1.20 lakh in the same period.
The number of households in debt, as measured by the incidence of indebtedness among surveyed households, increased from 31.4 per cent in the previous survey to 35% in rural India, while it remained constant at 22.4 per cent for urban households.
“We estimate that household credit in rural and urban areas may double in 2021 from 2018 levels,” SBI Group Chief Economic Advisor Soumya Kanti Ghosh said in a report on Wednesday. ‘ A loan of Rs 33 lakh. “This indicates that COVID affected households significantly,” he said.
As of June 2018, the average debt among indebted rural households was over ₹1.70 lakh, with agricultural households reporting higher debt of around ₹1.85 lakh. Among the indebted urban households, the average debt was around ₹ 5.37 lakh, with the self-employed households having an average loan of around ₹ 6.53 lakh.
Barring Goa and Sikkim, the average debt of rural households has increased in all other states, with some states increasing by more than 200%, which anticipates a further increase in debt levels in the wake of the pandemic.
Highlighting the wrath of the pandemic, SBI estimated that household credit at the GDP level rose sharply to 37.3% in 2020-21 from 32.5% in 2019-20. Although it declined to 34% in the first quarter of 2021-22 as GDP rose again, in total, households’ debt rose to Rs 75 lakh crore by June this year, from Rs 73.59 in the previous financial year. Lakh crores was Rs. .
However, these debt levels tell only part of the story, as households’ debt-to-asset ratios have also declined, indicating a greater potential crisis in debt repayments. The ratio for rural households increased from 3.2 in 2012 to 3.8 in 2018, with urban households reporting a ratio of 3.7 to 4.4 in 2012.
state wise trends
SBI Economist said, “State-wise trends for rural households show that the proportion declined in 11 states in 2018, but it is still high in some states like Kerala (9.7) and Andhra Pradesh (9.1). ”
In 2012, the asset ratio for rural households in Kerala was 5.4, so it nearly doubled in a six-year period. In contrast, Tamil Nadu recorded a decline in the ratio of 6.8 to 5.6, while Andhra’s high ratio of 9.1 was better than the 14.1 recorded in 2012.
The debt to asset ratio for rural households doubled in five states, including Gujarat and Haryana, while the same was true for urban households in the other five states – Maharashtra, Punjab, Assam, Chhattisgarh and Nagaland.
“The state-wise trend for urban households is more encouraging as 14 states exhibited a decline in the debt-asset ratio in 2018, indicating low indebtedness,” Mr. Ghosh said.
Odisha and Uttar Pradesh recorded the sharpest decline in the urban indebtedness to asset ratio, down from 14.7% in 2012 to 2018 and 4.5% in Uttar Pradesh from 2.2% earlier.
Average urban household debt in Uttar Pradesh also declined from ₹87,000 to ₹61,000, but rural households saw an 80% increase from ₹22,000 to ₹40,000 in the period 2012 and 2018. The debt to asset ratio for households in rural Uttar Pradesh marginally increased from 2.1 to 2.2.
However, SBI’s economic research team acknowledged that the situation in rural India could be worse than suggested.
loan waiver
“A serious concern is that even states with low domestic debt are going for loan waivers. Also, states are implementing loan waivers irrespective of the debt-asset ratio of households and hence the extent of rural distress may be higher than we anticipated,” Mr. Ghosh said.
Nine of the major crop-producing states have debts above the national average, six of which have announced farm loan waivers since 2014, while Rajasthan and Karnataka have announced it twice, the report said.
A silver lining from the official survey was the reduction in the share of cash credit outstanding from non-institutional lending agencies in rural India, which fell from 44% in 2012 to 34% in 2018. “Notably, almost all the states have registered a huge decline. In non-institutional credit to rural areas, indicating an increase in formalization of the economy,” Mr Ghosh said.
The National Sample Survey was conducted by the NSO on two visits, the first between January and August 2019, and the second time between September and December 2019, from the same set of sample houses. “The survey was spread over 5,940 villages covering 3,995 blocks covering 69,455 houses in rural area and 47,006 houses in urban area,” the NSO said.
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