Asset Divide

Sometime the facts can be baffling. As per NSSO in 2012, 98.3% of rural households and 93.5% of urban households have reported owning some kind of physical or financial assets. What is baffling is that nearly all households in rural India also apparently own some form of assets, which begs the question, how is this possible when poverty levels are so high. Moreover its bewildering to know that though considered poor the average value of asset (AVA) owned is around ₹10.07 lakhs (though this is nearly half of the AVA in urban area which is around ₹22.85 lakhs).

The gap in within rural areas are wide and the basis varying. When seen on the basis of occupation, non-cultivators hold less valuable assets on an average, at around ₹6.75 lakhs. While cultivator’s own nearly 4 times the assets value at ₹28.73 lakhs. One of the reason for the cultivators surpassing the non-cultivators is that the majority of the holdings are in form of land; 72.6% of the holdings by rural households is in form of land. For cultivators this figure is above average at around 83.14%, while for non-cultivators it is just a few notch lower at 64.60%. The other asset component which is of any significance to the rural households is buildings with more than one-fifth or 21.13% is in the form of buildings

As the value of ownership these unmovable assets is not uniform throughout the country, the AVA’s also follow the same path. Of the 18 big states in India 11 states have average value below the all India average, and while 7 states above have above average valuations. Odisha, West Bengal and Andhra Pradesh are the outliers on the negative side with an AVA of less than half of the national average. The well  to do states  are Gujarat, Kerala, Punjab and Haryana with the northern states of Punjab and Haryana showing an average asset ownership valuations as high as four times the national average. Thus these two states alone have a big influence on the national average.

The divide is also most prominent when one tries to study the AVAs on basis of income. As expected as seen in majority of times, the disparity of income is reflected in AVA held. The disparity is wide with the poor 10% owning AVA of around ₹0.25 lakh while the richest 10% own assets worth ₹56.89 lakhs on an average. It’s like even though the zamindari system was abolished long back the zamindar still exist.

In spite of the divide one thing is certain that there has been a growth in AVA during the decade gap in the two surveys conducted by NSSO. During 2002 survey the AVA of assets held by the rural households was around ₹ 2.66 lakhs; a jump of 4 times in the last 10+ years. For non-cultivators the jump was six folds from ₹ 1.07 lakh, while for the poor farmers it was more than 7 times from AVA of ₹3.73 lakhs during 59th Round of NSSO Survey.

During the same period, another obvious trend is that India is becoming more credit friendly. In 2002 on an average 26.5% and 17.8% households in rural and urban area had some form of debt (Debt being a cash loan outstanding). As per the last survey in 2012, the level of indebtedness has increased to 31.4% in the rural households and 22.4% in the urban households. These are far lower than global averages and the hope is that credit is used to grow quality assets which appreciate in time and not on non-productive consumption. At Quantta we constantly analyse and understand India to guide policy and decision makers to navigate their way through what is a complex country.