The per capita income in the southern states was higher than in other states of the country, yet the high indebtedness in both rural and urban households in these states may seem counter-intuitive.
Southern states have higher household debt than other parts of the country, said a report on Tuesday.
Quoting data from the 2013-2019 All India Credit and Investment Survey (AIDIS), domestic agency India Ratings said household debt in both rural and urban areas was higher in southern states than in the rest of India.
In 2019, Telangana with 67.2% had the highest proportion of its rural households and Nagaland with 6.6% had the lowest proportion of its rural households.
It said that 47.8 per cent of urban households are indebted in Kerala, where urban households have the highest debt and Meghalaya has the least debt at 5.1 per cent.
Among the major states, Uttarakhand had the lowest proportion of indebted households in rural areas and Chhattisgarh among urban areas.
The per capita income in the southern states was higher than in other states of the country, yet the high indebtedness in both rural and urban households in these states may seem counter-intuitive.
“Ind-Ra believes that one of the ways to understand this dichotomy is to look at the average amount of home loans, the average value of home assets and the debt-asset ratio because often the amount of debt is tied to the property. holds and/or may pledge,” the report said.
Except for Kerala, although a higher incidence of indebtedness in both rural and urban households in the southern states found no reflection in the higher average amount of loan per indebted household or the higher average value of property per rural household, a report in these states As per, high debt to assets ratio in 2019.
Four southern states – Andhra Pradesh, Kerala, Tamil Nadu and Telangana – are among the five states with the highest debt to asset ratios for both rural and urban households, while a fifth – Karnataka – has a higher than the all-India average of asset ratios. For both rural and urban households.
“This indicates that not only are a higher proportion of households indebted in the southern states, but they were also more leveraged,” it pointed out.
Typically, high leverage is often interpreted as a sign of financial vulnerability, but the rating agency said it believes that the ability to take out and service higher debt is also linked to the asset/income profile of households. and stated that the per capita income is higher than the national average for all southern states.
“It appears that higher per capita income growth in combination with higher per capita income and higher financial penetration/inclusion probably resulted in higher incidence of debt as well as higher leverage among households in these states,” it said. .
Domestic indebtedness has increased recently due to the impact of the COVID-19 pandemic, adding that RBI data is already indicating that the domestic debt to GDP ratio has increased from 33.8% in Q4FY20 to 37.9% in Q3FY21. Gaya.
In the absence of income growth prospects, a meaningful switch from mere essentials to discretionary spending is unlikely, the agency said, adding that the government will have to support the economy through spending.
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