The net financial wealth of households in India has soared to a significant 115.9 per cent of the country’s gross domestic product (GDP) for the quarter ending June 2024 (Q1FY25), according to a research report released by Motilal Oswal on Friday. This growth in households' gross financial assets has accelerated since the pandemic, while household debt has remained stable compared to pre-pandemic levels.

The report indicates that household gross financial assets have reached 157.9 per cent of GDP in Q1FY25, surpassing the previous record of 152.9 per cent set in Q4FY21. Before the pandemic, household financial assets stood at 123 per cent of GDP.

Meanwhile, household financial liabilities remained steady at 42 per cent of GDP in Q1FY25. The research report indicates that household debt rose to Rs 127 trillion in Q1FY25, up from Rs 106 trillion in Q4FY23. In the quarters before the pandemic, debt accounted for 35 per cent of GDP.

Household financial assets encompass currency, deposits, equities, investment funds, insurance funds, and pension funds. “Interestingly, the share of equity and investment funds has surged, while the shares have been declining for other asset classes such as currency, deposits, and insurance,” the report reads.

The report indicates that equity and investment funds, which include investments in listed equities and mutual funds, represent the largest portion of household financial assets after deposits. In Q1FY25, their share is estimated to have reached 28 per cent of total household gross financial assets, the highest level recorded to date and more than double what it was approximately a decade ago.

“The surge in the equity market in recent years has been truly impressive. It is vital to note that while its share in household gross financial assets is at an all-time high, the share of the household sector in India’s equity market has been very range-bound, oscillating between 18 per cent and 22 per cent since FY16, with a 21.5 per cent share in Q1FY25,” the report said.

Meanwhile, deposits, including small savings, accounted for 38 per cent of household gross financial assets in Q1FY25, a decline from around 50 per cent during the FY10 to FY14 period. Similarly, the currency share decreased to just 7 per cent, slightly above its level immediately following demonetisation. Additionally, the share of insurance funds has dropped to a 17-year low of 13.4 per cent in Q1FY25. In contrast, pension and provident funds have increased their share over recent years. Their share surpassed 10 per cent for the first time in FY20, rising from 7.5 to 8.5 per cent between FY07 and FY15, and has remained at that level since then.