Authors
Sahana Seetharaman & Shrey Tiwari
Summary
In this blog, we bifurcate the 77th round of the All-India Debt and Investment Survey 2019 (AIDIS) data on the net worth of Indian households by state, occupation, education groups and ownership of financial instruments. AIDIS is a cross-sectional household survey, carried out by the National Sample Survey Organization (NSSO) almost once every ten years. It collects detailed information on assets and liabilities from a nationally representative sample of households. In this post, we find that the distribution of net worth is skewed as there is a higher concentration of households with lower levels of net worth. It is also seen that households better integrated in the formal financial system enjoy a higher net worth compared to households that are not.
- Introduction
The net worth of a household is defined as the total value of the assets owned by the household minus the total value of its liabilities. It provides a snapshot of the household’s financial position and can be used to gauge its financial health. It is also considered a vital ‘economic resource’ for a country’s growth. Net worth, also referred to as household wealth, strongly affects the aggregate consumption levels in an economy. Thus, it becomes relevant to study household’s net worth and how it differs across geography, occupation, education, and social groups, among other factors.
In this blog, we use the 77th round of the All-India Debt and Investment Survey 2019 (AIDIS hereon), for assessing India’s household wealth and how it correlates with different geographic and demographic factors of the households.
- Skewed distribution of net worth with most households falling towards the lower end
Table 1 suggests that the net worth of households is highly skewed, with the average net worth being ₹19.54 lakhs while the median is much lower at around ₹7.6 lakhs. This means that there is a higher concentration of households with lower levels of net worth. The bottom 10% of households have a net worth below ₹56,200 while the top 10% of households have a net worth of more than ₹44 lakhs.
2.1 Net worth of households differs by states
Households in the Union Territory of Chandigarh have the highest average net worth in the country (Table 2). The erstwhile state of Jammu and Kashmir[1] has the highest average net worth across states, followed by Goa and Delhi. The high position of Jammu & Kashmir is notable as it consistently ranks in the bottom ten in terms of per capita GDP.[2] The bottom three states of Odisha, Tripura, and Assam have an average household net worth of fewer than ₹10 lakhs.
2.2 Average Net worth of households across employment categories
Self-employed households enjoy a higher net worth across employment categories, in both the rural and urban sectors. According to Table 3, households that are self-employed in agriculture have the highest net worth in rural areas (₹24 lakhs), while self-employed households in urban areas have the highest average net worth (₹40 lakhs). On the other hand, households involved in casual labour have the lowest average net worth, both in rural and urban areas. The highest proportion of urban households are involved in salaried/regular wage work (40%) and their average net worth is ₹27.3 lakhs.
2.3 Average net worth by education levels of the head of the household
The net worth of a household increases with a rise in the education level of the head of the household (Table 4). Except for Diploma courses at the higher secondary and graduate levels, the average net worth rises with each subsequent increase in the education level.
2.4 Relationship between the type of assets and liabilities held by the households and their net worth
The findings show that households that are integrated into the formal financial system have a higher net worth on average (Table 5). Households with members owning life insurance, a credit/debit card, and an e-wallet have an average net worth two times more than that of households whose members don’t own any. The same holds true with liabilities. The average net worth of households having outstanding formal loan(s) is ₹24 lakhs as compared to around ₹17.5 lakhs for households that don’t. Conversely, households having outstanding informal loan(s) have a lower average net-worth of around ₹15.5 lakhs as opposed to about ₹20.5 lakhs for households that don’t.
According to Table 6, the net worth of a household is negatively correlated with the ownership of informal loans and positively correlated with the ownership of formal loans by the household. This means that a household with an informal loan is likely to have a lower net-worth than a household that has not taken an informal loan, whereas a household with a formal loan is likely to have a higher net-worth than a household that has not taken a formal loan. Finally, the possession of e-wallets has a stronger positive correlation with household net worth compared to other financial and physical instruments.
TABLE 6: Correlation of households’ net worth with the ownership of different assets and liabilities[3]
[1] The survey was carried out before the state of Jammu and Kashmir was bifurcated into the union territories of Jammu and Kashmir, and Ladakh
[2] Handbook of Statistics on Indian States, 2020-21, The Reserve Bank of India
[3] Each of the asset/liability variable being correlated with the net worth is a dummy variable that takes a value of 1 if the household owns it and a value of 0 if the household does not own it.
Cite this blog:
APA
Seetharaman, S., & Tiwari, S. (2022). NSSO’s latest Debt and Investment survey points to significant disparities in net worth among Indian households. Retrieved from Dvara Research.
MLA
Seetharaman, Sahana and Shrey Tiwari. “NSSO’s latest Debt and Investment survey points to significant disparities in net worth among Indian households.” 2022. Dvara Research.
Chicago
Seetharaman, Sahana, and Shrey Tiwari. 2022. “NSSO’s latest Debt and Investment survey points to significant disparities in net worth among Indian households.” Dvara Research.
