Monday, 28 November 2016

Total Wealth of Urban vs Rural population in India

(via Sunny Narang)

 A quick calculation of total wealth of Urban vs Rural population in India and their debt/capital ratios : Rural India is 2% as compared to 25% in Urban India . 

In short Indian farmers have 40 crore acres of land , and even if we take at an average of Rs.10 lac an acre (ranging from few crores in Haryana to maybe 5 lacs an acre in arid parts ) its value is 400 lac crores. The total valuation of the Indian share market is 100 lac crores, total bank deposits are another 100 lac crores  .

Total bank debt in India is about 70 lac crores , Money lenders will have another Rs. 30 lac crores , so total debt at most is Rs. 100 lac crores . Though Rural India will not be more than Rs. 10 lac crores .

As Household Savings are the 80% of Indian savings , they continue to invest more in real-estate and gold, than equity . 

"After peaking at 12% in 2009-10, financial savings as a percentage of India's gross national disposable income (GNDI) had dipped to a low of 7% in 2012-13. That trend has now reversed. RBI estimates that the savings in financial assets in 2014-15 moved up to 7.5%. In contrast, savings in physical assets (like real estate and gold), an old favourite among Indians, are down. From a high of 14.8% in 2011-12 it came down to 10.4% in 2013-14 (the latest period for which government data is available). 

World Gold Council, says today India has over 22,000 tonnes of gold in household savings, which would be worth over Rs 60 lakh crore. "

My call is that even Gold is more held by rural than urban India .

So for me rural India has much more safe assets than urban India . 

Even if I take all of Urban Real-Estate market at 

In 42 cities real-estate is worth 25-30 lac crores , pan urban India at most it will be another 100 lac crores in 6000 plus towns , which are many rural-urban .

So the total assets , real-estate plus shares plus FD's of urban India are about 300 lac crores plus 20-30 lac crores Gold , while Rural Indian assets are about 400 lac crores plus 30-40 lac crores gold .

Indian assets are then 350 lac crore urban 450 lac crores rural: Total 800 lac crores (GDP is 130 lac crores) . 

So Urban India has against a  capital of 350 lac crore , a 90 lac crore debt while Rural India has a Rs. 10 lac crore debt against an asset of Rs. 450 lac crores !  A 25% debt/capital ratio in urban India versus a 2% in rural India !

Housing prices in 42 major cities across India could drop by up to 30 per cent over 6-12 months after the demonetisation of high-value notes, wiping out over Rs 8 lakh crore worth market value of residential properties sold and unsold by developers since 2008. 

"In the aftermath of demonetisation impact on Indian real estate sector, market value of residential property of Rs 802,874 crore is expected to be wiped off in the next 6-12 months," PropEquity said in a statement. "

So if this is the case , then rural India still has lot of loan collateral compared to urban India .

Even if the 18 crore rural households took an average of Rs 1 lac loan , it would be Rs. 18 lac crores at most , still less than 5% of rural agricultural land value. 

There are about 330 million census-houses in India according to 2011 census and about 24.5 million are vacant and so the occupied are 306 million. 

Of these 306 million , 236 million are used as residences . 8.5 million as residence plus work. And rest for other uses . So as homes there are about 245.5 million . 

And only 90 million have concrete roofs , another 26.5 million have machine-made tiles . That is about 116 million of 306 odd million have so-called "modern" permanent roofs , which is about 33% . 

135 million have grass/thatch/burnt brick/traditional tiles , another 50 million have asbestos/GI/aluminium/Steel sheets .  n

These figures will show you how India actually lives . 

India is a great mix of permanent, semi-permanent , always-in-construction , temporary housing . Using tradition, modern , a mix of both construction materials . 

Now lets look at the state of rural households on debt .  Average debt of an agricultural household in rural India is about Rs.50,000/- but Rs.1-2 lacs in Punjab and all Southern Indian states . 

And the lower your land holding or you are landless , you will most probably take a loan from a money-lender . 

And 85% of the 138 million holdings are marginal holdings or less than 1 hectare , which is 117 million are marginal farmers . 

There are almost 25 crore Jan Dhan accounts , and about 13 crore post office bank accounts . 

Total money in Jan Dhan and post office accounts maybe near 7-8 lac crores while in the Scheduled Banking system its 100 lac crore plus .

"India’ banking system reported total deposits of Rs 100 lakh crore for the first time ever in September, 2016, data released by the RBI show, reports Shakti Patra in Mumbai. With demand deposits crossing R10 lakh crore and time deposits crossing the Rs 90 lakh crore mark, the month saw the highest-ever monthly rise of Rs 5.32 lakh crore — more than the total deposits in the banking sector 20 years back."

That means the poorest 85-90% Indians collectively have very little , maybe less than 10-15% of total bank deposits in India . 

"According to the census, there are a total number of 24.39 crore households in the country, of which 17.91 crore live in villages. 

Of these, 10.69 crore households are considered as deprived."

Of these 17.9 crore households , about 13.8 crore households have land of some kinds , and 4 crores have no land . 

So the total Debt of 18 odd crore rural families is about Rs. 9 lac crores (taking at Rs.50,000 per household) . While Total Bank loans in India are about 70 lac crores , with Rs 13 lac crores stressed corporate debt .

That means the poorest 85-90% also hold only about 10-15% of all debt in Indian banking system . 

"India Ratings, a Fitch associate, estimates that one-fifth (21% precisely) of the total bank credit is stressed. Total bank credit at the end of March 2016 stands at Rs 70 trillion (lakh crore)."

Just the mutual fund assets are another 14 lac crores in 2016 , while the stock-market capitalisation is about 100 lac crores. 

"An Indian agricultural household on an average has an outstanding loan of Rs 47,000 while their monthly income is a meagre Rs 6,426, according to latest official data.

Loans included all kinds of outstanding borrowings irrespective of the purpose for which loans were taken. Around 52 % agricultural households in rural India were estimated to be indebted at the time of the survey titled  ‘Income, Expenditure, Productive Assets and Indebtedness of Agricultural Households in India’. 

The survey was conducted in 2013 and its report released in 2016. 

Kerala has the highest outstanding loan amount at Rs 2.13 lakh per agricultural household. 

At third position, Punjab with an average outstanding loan of Rs 1.19 is the only state outside south that has found space in top six.

The average outstanding loan of an agricultural household in Andhra Pradesh is Rs 1.23 lakh while in Tamil Nadu it is Rs 1.15 lakh, Karnataka Rs 97,200 and Telangana Rs 93,500, according to the 70th National Sample Survey.

The survey said 77.7 % of agricultural households in Kerala had outstanding loans. 

Among agricultural households with less than 0.01 hectares land, the largest amount of outstanding was reported by agricultural households in Andhra Pradesh (Rs 2.40 lakh) followed by Rajasthan (Rs 1.694 lakh) and Kerala (Rs 1.69 lakh). 

The survey also showed that around 60 % of the outstanding loans were taken from institutional sources, which included co-operative society (14.8 %) and banks (42.9 %). 

Among non-institutional sources, money lenders (25.8 %) had the major share in terms of outstanding loans.

One of the concerns would be the poor rate of lending by banks to farmers with less than 0.01 hectares land. 

According to the survey, 63.7 % of such agricultural households had outstanding loans taken from money lenders while it was a mere 12.9 % from the banks."

 Until the 1999-2000 survey, the NSSO schedules were designed to record the information on extent of land up to two decimal places. 

As a result, the smallest land holding recorded was 0.01 hectares. Any household having land less than 0.01 hectares was treated as landless. 1 hectare is 10,000 square meters , 0.01 hectare is only 100 sq meters , or about 1000 sq feet . 

As per Agriculture Census 2010-11, total number of operational holdings was estimated as 138.35 million. The total operated area was 159.59 million hectare. (1 Hectare is 2.47 acre & 1 acre is 4046 or about a total of 16 crore hectares or 40 crore acres and at the average rate of Rs. 10 lac an acre the total land value is Rs 400 lac crores . 
The average size of the holding has been estimated as 1.15 hectare. The average size of holdings has shown a steady declining trend over various Agriculture Censuses since 1970-71.

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