Economic Survey Highlights Major Shift in Indian Household Financial Savings
The latest Economic Survey for 2025-26, tabled in Parliament, reveals a significant transformation in how Indian households allocate their financial savings. Over the past decade, traditional bank deposits have steadily lost ground to more dynamic investment avenues like mutual funds and equities.
Sharp Decline in Bank Deposits' Share
According to the survey, bank deposits now account for just 35% of annual household financial savings in FY25, marking a dramatic fall from 58% in FY12. This represents a substantial shift in the financial behavior of Indian savers, who are increasingly looking beyond conventional banking instruments.
Rise of Mutual Funds and Equities
This decline in bank deposits has been largely offset by a remarkable surge in investments in mutual funds and shares. The combined share of these instruments jumped from a mere 1.8% in FY12 to 15.2% in FY25, indicating a growing appetite for market-linked returns among households.
The survey emphasizes that this trend reflects portfolio diversification rather than displacement. Households are adding equity exposure to their existing savings portfolios instead of completely abandoning traditional instruments.
Systematic Investment Plans (SIPs) Drive Growth
A key driver behind this shift has been the phenomenal growth of Systematic Investment Plans (SIPs). Average monthly SIP flows have increased sevenfold – from under ₹4,000 crore in FY17 to over ₹28,000 crore in FY26. This disciplined investment approach has made equity markets more accessible to retail investors.
Assets managed through mutual funds have also grown significantly relative to the economy's size, rising from around 10% of GDP in 2010 to approximately 23% as of November 2025.
Unprecedented Retail Participation
Since the pandemic, India has witnessed an unprecedented surge in domestic retail participation in both direct stock trading and mutual funds. Several factors have contributed to this expansion:
- Stable macroeconomic fundamentals
- Promising corporate earnings prospects
- Simplified KYC processes enabling seamless investor onboarding
- Strong regulatory oversight ensuring market integrity
The numbers speak volumes about this participation boom. In the financial year till December 2025, 23.5 million new demat accounts were added, taking the total count beyond 216 million. Simultaneously, the mutual fund industry reached 59 million unique investors by the end of December 2025.
Market Context and Performance
This increased retail participation comes at a time when Indian equity markets have faced challenges. Over the past year, markets have shown weaker performance due to:
- The imposition of US tariffs affecting trade dynamics
- Weaker-than-expected corporate earnings in some sectors
- Consistent foreign capital outflows
In 2025 alone, foreign institutional investors (FIIs) sold shares worth ₹90,992 crore of Indian equities, according to NSDL data. Indian markets have also underperformed compared to global peers during the current financial year:
- Nifty 50 gained 7.7%
- South Korea's Kospi surged 104%
- Japan's Nikkei rose 43%
- China's CSI 300 gained 21%
Despite these headwinds, Indian retail investors have demonstrated remarkable resilience, continuing to participate actively in equity markets through both direct investments and mutual fund routes.
Implications for Financial Landscape
The Economic Survey's findings highlight a fundamental change in India's financial ecosystem. As households increasingly diversify their savings into market-linked instruments, several implications emerge:
- Greater financial market depth and liquidity
- Enhanced capital formation for businesses
- Improved financial literacy and awareness among citizens
- Potential for higher long-term returns for household savings
This shift represents a maturing of India's financial markets and a growing confidence among households in participating in the country's economic growth story through equity investments.
