Using the RBI’s Flow of Funds data, this paper examines changes in India’s sectoral balance sheets between FY2011-12 and FY2023-24. It confirms two longstanding features: households remain the dominant creditor and government the dominant borrower. It identifies a break in the historical stability of household asset portfolios, with savings increasingly moving into mutual funds, insurance, and pension products, though deposits remain the largest asset class. It further finds that deleveraging has left corporate balance sheets healthier, and that non-banking financial institutions have displaced banks as the dominant holders of government debt. The paper then draws out four macroeconomic insights: personal consumption appears increasingly supported by credit; private investment remains tepid on weak demand, despite repaired balance sheets; non-banking intermediation has deepened capital markets while raising exposure to market and regulatory dynamics; and persistent current account deficits leave India’s growth dependent on mobile foreign capital.

Authors:

Puneet Bhasin & Arjun Jayadev