<p>Household indebtedness is higher in the southern states as compared to the other parts of the country, a report said on Tuesday. Citing the All India Debt and Investment Survey (AIDIS) data from 2013-2019, domestic agency <em>India Ratings</em> said household indebtedness both in rural and urban areas was higher in southern states than rest of India.</p>.<p>In 2019, Telangana with 67.2 per cent had the highest proportion of its rural households indebted and Nagaland with 6.6 per cent had the lowest proportion of its rural households indebted.</p>.<p>Kerala with 47.8 per cent of urban households indebted had the highest incidence of indebtedness among the urban households and Meghalaya with 5.1 per cent the lowest, it said.</p>.<p>Among the major states, the lowest proportion of indebted households in rural areas were in Uttarakhand, and in urban areas in Chhattisgarh.</p>.<p><strong>Also Read | <a href="https://www.deccanherald.com/opinion/second-edit/rural-indebtedness-is-cause-for-concern-1031569.html" target="_blank">Rural indebtedness is cause for concern</a></strong></p>.<p>Per capita income in southern states was higher than other states of the country, yet a higher indebtedness in both rural and urban households in these states may appear counterintuitive.</p>.<p>“Ind-Ra believes that one of the ways to understand this dichotomy is to look into the average amount of household debt, the average value of household assets and the debt-asset ratio as quite often the quantum of debt is linked to the assets one holds and/or can pledge,” the report said.</p>.<p>Except for Kerala, although a higher incidence of indebtedness in both rural and urban households in southern states did not find a reflection in either a high average amount of debt per indebted household or a high average value of assets per rural household, these states had a high debt to asset ratio in 2019, according to the report.</p>.<p>Four southern states – Andhra Pradesh, Kerala, Tamil Nadu and Telangana – figured among the five states having the highest debt to asset ratio both for rural and urban households, while the fifth – Karnataka – has a debt to asset ratio higher than all India average both for rural and urban households.</p>.<p><strong>Also Read | <a href="https://www.deccanherald.com/national/half-of-rural-agricultural-households-indebted-nss-data-shows-1029177.html" target="_blank">Half of rural agricultural households indebted, NSS data shows</a></strong></p>.<p>“This indicates that not only a higher proportion of households in southern states are indebted, but they were also more leveraged,” it pointed out. Generally, higher leverage is often interpreted as a sign of financial vulnerability, but the rating agency said it believes the ability to take higher debt and service the same is also linked to the asset/income profile of the households and added that the per capita income is higher than the national average for all the southern states.</p>.<p>“It appears that the higher per capita income and higher per capita income growth in combination with higher financial penetration/ inclusion perhaps has resulted in the higher incidence of indebtedness as well as higher leverage among the households in these states,” it said.</p>.<p>Household indebtedness has aggravated lately due to the impact of the Covid-19 pandemic, it said, adding that RBI data is already indicating that the household debt to GDP ratio rose to 37.9 per cent in Q3FY21 from 33.8 per cent Q4FY20.</p>.<p>In the absence of income growth possibilities, a meaningful switch to discretionary spending from essentials only is unlikely to take place, the agency said, adding that the government will have to keep supporting the economy through spending.</p>.<p><strong>Check out latest DH videos here</strong></p>
<p>Household indebtedness is higher in the southern states as compared to the other parts of the country, a report said on Tuesday. Citing the All India Debt and Investment Survey (AIDIS) data from 2013-2019, domestic agency <em>India Ratings</em> said household indebtedness both in rural and urban areas was higher in southern states than rest of India.</p>.<p>In 2019, Telangana with 67.2 per cent had the highest proportion of its rural households indebted and Nagaland with 6.6 per cent had the lowest proportion of its rural households indebted.</p>.<p>Kerala with 47.8 per cent of urban households indebted had the highest incidence of indebtedness among the urban households and Meghalaya with 5.1 per cent the lowest, it said.</p>.<p>Among the major states, the lowest proportion of indebted households in rural areas were in Uttarakhand, and in urban areas in Chhattisgarh.</p>.<p><strong>Also Read | <a href="https://www.deccanherald.com/opinion/second-edit/rural-indebtedness-is-cause-for-concern-1031569.html" target="_blank">Rural indebtedness is cause for concern</a></strong></p>.<p>Per capita income in southern states was higher than other states of the country, yet a higher indebtedness in both rural and urban households in these states may appear counterintuitive.</p>.<p>“Ind-Ra believes that one of the ways to understand this dichotomy is to look into the average amount of household debt, the average value of household assets and the debt-asset ratio as quite often the quantum of debt is linked to the assets one holds and/or can pledge,” the report said.</p>.<p>Except for Kerala, although a higher incidence of indebtedness in both rural and urban households in southern states did not find a reflection in either a high average amount of debt per indebted household or a high average value of assets per rural household, these states had a high debt to asset ratio in 2019, according to the report.</p>.<p>Four southern states – Andhra Pradesh, Kerala, Tamil Nadu and Telangana – figured among the five states having the highest debt to asset ratio both for rural and urban households, while the fifth – Karnataka – has a debt to asset ratio higher than all India average both for rural and urban households.</p>.<p><strong>Also Read | <a href="https://www.deccanherald.com/national/half-of-rural-agricultural-households-indebted-nss-data-shows-1029177.html" target="_blank">Half of rural agricultural households indebted, NSS data shows</a></strong></p>.<p>“This indicates that not only a higher proportion of households in southern states are indebted, but they were also more leveraged,” it pointed out. Generally, higher leverage is often interpreted as a sign of financial vulnerability, but the rating agency said it believes the ability to take higher debt and service the same is also linked to the asset/income profile of the households and added that the per capita income is higher than the national average for all the southern states.</p>.<p>“It appears that the higher per capita income and higher per capita income growth in combination with higher financial penetration/ inclusion perhaps has resulted in the higher incidence of indebtedness as well as higher leverage among the households in these states,” it said.</p>.<p>Household indebtedness has aggravated lately due to the impact of the Covid-19 pandemic, it said, adding that RBI data is already indicating that the household debt to GDP ratio rose to 37.9 per cent in Q3FY21 from 33.8 per cent Q4FY20.</p>.<p>In the absence of income growth possibilities, a meaningful switch to discretionary spending from essentials only is unlikely to take place, the agency said, adding that the government will have to keep supporting the economy through spending.</p>.<p><strong>Check out latest DH videos here</strong></p>