1. Household Indebtedness 2012 Household Budget Survey Rajive Ajodhea 18 November 2013 1

2. Debt Coverage At the 2012 Household Budget Survey, the households surveyed were requested to state the amount they had disbursed as repayment of debt during the reference period 2

3. Debt prevalence, 2012 3 Among indebted households, housing was the most common item of debt, followed by household appliances and furniture 45.3 % of the surveyed households reported having at least one debt repayment

4. Debt repayment, 2012 On the average, an indebted household disbursed Rs 6,830 per month on debt repayment in 2012 The average household disposable income 1 of an indebted household was Rs 37,180 in 2012 Debt repayment represents 18.4% of the disposable income of indebted households 1 Income from employment, property and transfer less income less taxes and social security contributions 4

5. Debt repayment by item, 2012 Housing was the item of debt with the largest debt repayment followed by motor vehicle and education. 5

6. Components of household debt repayment, 2012 * Include furniture, audio-visual equipment and household appliances **include wedding, computer, mobile phone, solar water heater, personal loans and health Housing represented the largest share of debt repayment 6

7. Indebtedness by income quintile of household, 2012 Income Quintile Percentage of households indebted Average monthly debt repayment (Rs) Average disposable income of indebted households (Rs) First Quintile21.42,63011,500 Second Quintile37.32,91018,190 Third Quintile48.33,71023,930 Fourth Quintile56.45,58033,530 Fifth Quintile63.713,60068,530 All households45.36,83037,180 7 Prevalence of indebtedness increase with the income of household Households in the fifth quintile are three times more likely to be indebted than those in the first quintile, 63.7% against 21.4% The monthly debt repayment among the fifth quintile was Rs 13,600, five times higher than that among the first quintile

8. Indebted households (%) by item of debt and quintile group of household income, 2012 Item of debt First Quintile Second Quintile Third Quintile Fourth Quintile Fifth Quintile All Households Housing36.050.253.862.067.757.5 Motor vehicle2.64.08.113.225.913.4 Education3.23.76.27.411.07.2 8 Housing is the most common item of debt across all quintiles However, the percentage of households who are indebted on housing was 36.0 % for the first quintile compared to 67.7% for the fifth quintile Similarly a larger proportion of households in the higher quintiles had debts on motor vehicle and education than those in the lower quintile However……..

9. Indebted households (%) by item of debt and quintile group of household income, 2012 Item of debt First Quintile Second Quintile Third Quintile Fourth Quintile Fifth Quintile All Households Furniture20.418.813.515.89.114.3 Audio-visual equipment 14.912.910.79.37.29.9 Household appliances 29.022.120.716.89.317.5 Other miscellaneous** 18.328.234.036.338.533.4 9 **Include wedding, computer, mobile phone, solar water heater and personal loans ……… households in the lower quintiles are more likely to be indebted on furniture, audio-visual and household appliances

10. Debt repayment components - Comparison of first and fifth income quintile of households, 2012 Monthly debt repayment Rs 2,630 Rs 13,600 Debt component Housing 36.4 %57.9% Motor Vehicle 1.6 %15.1 % Education 2.7 % 7.1 % Furniture 7.4 % 1.8 % Audio -Visual Equipment 4.8 % 1.0 % Household Appliances 14.2 % 1.1 % Health 2.4 % 0.9 % Other 30.5 % 15.1 % All items 100.0%100.0% First QuintileFifth Quintile 10

11. Debt repayment as a percentage of disposable income by quintile group of household income, 2012 On average, an indebted households pay 18.4% of its disposable income as debt repayment Households in the first quintile allocate 22.8 % of the disposable income to debt repayment compared to 19.8 % for households in the fifth quintile 11

12. Indebtedness- Comparison of first and fifth income quintile of households, 2012 % of households indebted 21.4 %63.7 % Monthly debt repayment Rs 2,630 Rs 13,600 Monthly disposable income of indebted households Rs 11,500 Rs 68,530 Debt repayment as a % of disposable income 22.8 % 19.8 % % of households indebted on Housing 36.0 %67.7 % Motor Vehicle 2.6 %25.9 % Education 3.2 % 11.0 % Furniture 20.4 % 9.1 % Audio -Visual Equipment 14.9 % 7.2 % Household Appliances 29.0 % 9.3 % First QuintileFifth Quintile 12

13. Debt prevalence by household type, 2012 Couple with unmarried children are more likely to be indebted – Main item of debt is housing followed by household appliances. Single member households are least indebted. Main item of debt for all type of household is housing 13

14. Indebtedness - Comparison of couple with unmarried children and couple without children, 2012 % of households indebted 55.9 %29.9 % Monthly debt repayment Rs 7,370 Rs 7,300 Monthly disposable income of indebted hholds Rs 37,620 Rs 37,150 Debt repayment as a % of disposable income 19.6 % 19.6 % % of households indebted on Housing 60.9 %56.9 % Motor Vehicle 13.4 %14.6 % Education 8.0 % 3.2 % Furniture 13.2 % 14.1 % Audio -Visual Equipment 9.3 % 7.1 % Household Appliances 16.3 % 16.4 % Couple with unmarried children 14 Couple without children

15. Evolution of Household Indebtedness, 2001/02 to 2012 There has been a slight drop in the proportion of indebted households in the past 10 years, from 47.6% in 2001/02 to 45.3% in 2012 Housing remained the main item of debt over the last 10 years Percentage of indebted households for housing increased from 43.1 % to 57.5% over the past 10 years. During that period, ownership of housing unit increased from 90 % to 93 % 15

16. Evolution of debt repayment, 2001/02 to 2012 16 2001/022006/072012 Increase 2001/02 – 2012 (%) Average monthly debt repayment Rs 3,100Rs 4,350Rs 6,830120.2 % Average monthly disposable income-indebted household Rs 17,170Rs 23,690Rs 37,180117.1% Debt repayment as percentage of disposable income 18.1 %18.4%

17. Evolution of debt repayment, 2001/02 to 2012 (continued) 17 Average debt more than doubled in the past ten years, i.e an increase of 120.2% After adjusting for inflation between 2001/02 and 2012, debt repayment increased by 23.3 % During same period, disposable income increased by 117.1%. The real increase in income was 21.6%, lower than the increase in debt repayment Debt repayment as a proportion of disposable income stood at 18.4 % 2012, against 18.1 % in 2001/02 – explained by the higher increase in debt repayment

18. Evolution of debt repayment by item of debt, 2001/02 to 2012 18 The increase in debt repayment in the past ten years was highest for housing (140%), followed by motor vehicle (106%) Debt repayment on furniture, audio-visual equipment and household appliances increased by around 50% during the same period

19. Debt repayment on education and health, 2006/07 - 2012 The average debt repayment on education rose by 50%, from Rs. 3,580 in 2006/07 to Rs 5,470 in 2012 Average monthly debt repayment on health amounted to Rs 2,700 in both 2006/07 and 2012. However, the proportion of indebted households with a debt on health increased from 0.7% to 2.3% during the same period 19

20. Average monthly debt repayment by quintile group of household income, 2001/02 and 2012 HBS Households in the fifth quintile had the highest increase in debt repayment (33.6%), followed by households in the first quintile (28%) The lowest increase in debt repayment was observed among households in the third quintile Quintile Group Average monthly debt repayment by indebted households (Rs) 2001/022012 Real increase (%) in debt repayment 2001/02-2012 First Quintile 1,1502,63028.0 Second Quintile 1,3602,91019.3 Third Quintile 1,9903,7104.3 Fourth Quintile 2,7505,59013.9 Fifth Quintile 5,70013,60033.6 All households 3,1006,83023.3 20

21. Debt repayment as a percentage of disposable income Quintile Group Debt repayment as percentage of disposable income Percentage increase from 2001/02 - 2012 2001/022012Debt Repayment Disposable Income First Quintile18.722.8 128.687.4 Second Quintile14.816.0 113.096.0 Third Quintile16.515.5 86.298.3 Fourth Quintile17.216.7 103.4110.1 Fifth Quintile19.719.8 138.6137.3 All households18.118.4 120.2117.1 Debt repayment as a percentage of disposable income increased for the first and second quintiles, the increase being higher for the first quintile The increase in the debt repayment for these two quintiles was higher than that of their disposable income 21

22. Thank you 22