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We also find that these properties of Indian balance sheets are difficult to explain using a standard lifecycle portfolio choice model, which we calibrate using estimated data on the income dynamics of Indian households.Taken together, it appears that these patterns are likely driven by unique aspects of Indian households’ financial decision-making.Our technology subcommittee, populated with experts in various aspects of finance, technology, and indeed, financial technology, thoroughly debated the complex issues surrounding the promise and peril of technological solutions in household finance.They have contributed to forward-thinking policy solutions to remove obstacles for the supply side to make progress in helping to address problems which simultaneously require customisation and scale.During these meetings, members of the sub-committees worked tirelessly to produce the material that constitutes this report. Our research subcommittee has generated genuinely new and insightful research on household finance in India, exploiting multiple waves of nationally representative datasets (such as the All India Debt and Investment Survey in India, as well as counter-part micro-surveys from Australia, Germany, the UK, the US, Thailand, and China), as well as more specialized surveys (such as the Finscope survey, the Financial Inclusion Insights Survey, and the ICE 360 degree survey) that focus on particular aspects of financial market participation in India.They have also collated work from authoritative and informative secondary sources on these topics, and have interacted extensively with world-renowned experts in these areas to pull in relevant content.A special mention is owed to Cristian Badarinza and Vimal Balasubramaniam for serving as an informal “drafting committee” for this report.Without their efforts, this report would simply never have come to fruition.
Pension accounts and investment-linked life insurance products exist, but they are only used frequently by households located in a small group of states, while in most other states, the contribution of pensions wealth to household wealth is negligible. We document high levels of unsecured debt, and perhaps more importantly, debt taken from non-institutional sources such as moneylenders.
We also list these individuals at the end of this report, and are hugely grateful for their generous contributions.
It is worth noting that for many, working in household finance is not merely an occupation, but rather, a vocation, and the levels of passion and enthusiasm we have witnessed have been quite extraordinary.
This is unusual in the international context, and especially unusual for younger households, and for households in the bottom 40% of the wealth distribution, i.e., those with the lowest amounts of gross assets. Despite the high holdings of real estate, mortgage penetration is low early in life, and subsequently rises as households age. Social arrangements in which households bequest housing wealth to future generations and in turn receive support during retirement are an underlying determinant of these patterns.
This is also at variance with Indian households’ counterparts in other countries, where debt has a characteristically hump-shaped pattern over the lifecycle. Such traditional approaches to household financial management have likely evolved over time as a rational response to prevailing economic conditions._______________ EXECUTIVE SUMMARY In the first part of this report, we provide our responses to points i) and ii) on the To R.We describe the results of an international benchmarking exercise, in which we document how Indian households allocate assets and take on liabilities both along the lifecycle and across the wealth distribution, and compare these patterns to those evident in micro-data on households in a range of advanced and emerging economies.We find several attributes of Indian households that are exceptional in the international context.