The situation was likely to worsen this year as a decline in bank deposits in FY21 coupled with rising health expenditure would pile on the debt for households, the firm said in a report on Monday.
The decline in bank deposits was indicative of a fall in household financial savings rate in the last fiscal, it said.
This called for fiscal policy action as India’s wage income as a percentage of GDP has been declining, down to 30.6% in FY21 from 34.1% in FY20, according to Soumya Kanti Ghosh, group chief economic adviser at SBI.
At the same time, India Inc’s profit after tax as a percentage of gross value added has grown substantially to 23.7% in FY21 compared to 13.4% in FY20.
“Significant corporate deleveraging also happening simultaneously (Rs 1.7 lakh crore reduction), fiscal policy and vaccination must!” Ghosh said via a Twitter update.
On the pandemic front, SBI Research warned that the third wave could begin as early as mid-August reaching a peak of about 1.7 times that of the second wave, based on international experience.
The report noted that the second was not yet over with about 45,000 daily Covid-19 cases still being recorded in the country.
Despite an increased vaccination pace, India had fully vaccinated only 4.6% of the population and 20.8% were provided one dose as of Monday.
Fresh cases in the 15 worst-affected districts, which were largely urban, had recorded an increase in June while the share of rural districts in new cases had declined only modestly during that month.
SBI Research said this was concerning given the lack of adequate health infrastructure in rural areas.
Economic activity had shown strong improvements since May-end with a robust recovery in weekly vegetables’ arrival, Regional Transport Office revenue collection and Apple mobility
Index, despite a declining labour participation rate, the report said.
Demand had also improved as evidenced by an increase in passenger vehicle sales at the dealership level, it said.
