Past, Present, Future: Micro-savings and investments industry in India

Sousthav Chakrabarty, Co-Founder & Chief Executive Officer, Siply

The Covid-19 pandemic has dealt a massive blow to almost all aspects of life, and financial security is no exception. As the pandemic swept across the nation, job losses, income reduction, and emergency savings eradication shook our financial foundation. The effect was more acute on those who were not on a solid financial footing when the pandemic began. This served as an eye-opener, especially for those who were knowledgeable about financial basics like budgeting but less so about financial preparation, such as investing or saving for emergencies.

Pandemic, a much-needed reality check.

Even though the abrupt changes in our way of life brought on by the pandemic left us stuck in the present, trying to counter the immediate past, there is still hope, as showcased by many studies that have shown that Indian households are saving more after the spread of COVID-19 despite job loss and pay cuts.

According to the Reserve Bank of India (RBI), household net financial savings (NFS) stood at 21.4% of GDP in 1QFY21 and 10.4% of GDP in 2QFY21, compared with 7–8% of GDP in the pre-COVID period. Another study found that Indian households’ savings remained higher than 13% of GDP for the most part of 2021, as compared to around 11% in fiscal 2019 and fiscal 2020 each. This number had even touched the highs of 23% during April-June 2020, when India was under lockdown.

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Furthermore, after a harrowing second wave, people have put savings right in the centre of their radar as one of the must-do things in 2022. Many people’s incomes were disrupted in 2021, and 2022 will be a year when they can replenish or rebuild their savings, for some of them from scratch.

All aboard the Savings Express

The sense of conservation is something that isn’t unique to middle or low-income Indian households but is shared by the affluent and wealthy, as well as indicated by the Wealth Expectancy Report 2021, which found that the affluent in India have become more future-focused and have reset their priorities: Nearly a half (42%) of people have set the goal ‘to improve their health’ followed by 39% who have set the goal ‘to be financially ready for major life changes and 37% who want to set aside more for their children’s future (education or financial support).

Digital to the Rescue

Demonetisation was the catalyst in India’s transition to a less-cash society, and the COVID-19 pandemic brought the message home about the importance of transacting digitally. As a result, today, there are innumerable fintech apps making finance easy for modern consumers by driving product innovations like digital gold, micro-investments, micro-savings, buy-now-pay-later, salary advance loans, and more. As a result, there has been a sudden shift away from the traditional offline services in many parts of the country to digital platforms leading to a much higher acceptance of online services as compared to before Covid. Furthermore, traditional savings means are cumbersome for many, and people are turning to new-age digital platforms for their varied financial needs. Thus, leading to increased trust on these digital platforms, and with regulatory tightening, this will only bode well for the genuine and honest digital services out there that are trying to offer value-added services to their users.

The shift in the savings mindset

Saving money may seem simple on the surface, but it is not that easy in practice despite the availability of immense advice, guidance and tools for the same. Furthermore, the pandemic has left many with depleted reserves, and some may have to begin from scratch. But the good news is that many new savings instruments like micro-savings and investment platforms have emerged that take into account varying incomes, necessities, expenses, responsibilities, and likes and help people devise a personalised saving or investment plan to attain one’s goals, whether it be an emergency corpus or buying a home.

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These micro-savings and micro-investments as a saving instrument realise the fact that consumers need to first focus on developing a habit of saving and then focus on the amount. This simplistic approach to savings that can kickstart a sound financial habit and help people achieve long term financial goals has attracted many to this new fintech offering, and with regulatory moments on the horizon in 2022, this is just the beginning.

Views expressed in this article are the personal opinion of Sousthav Chakrabarty, Co-Founder & Chief Executive Officer, Siply.

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