2016 was a significant year for Indian citizens in terms of their financial or ‘money’ life. What with demonetisation, the equity markets ending the year with dismal returns, Fixed Deposit rates dropping and subsidies for digital payments; it was a year of change, indeed! However, 2017 looks like it is going to be a year of ‘more’. Want to know how? Let us tell you through these 4 predictions for the financial market in 2017.
More Credit Card Users
With several ATMs in the country still running dry after the demonetisation drive last year, people are waking up to the benefits of Credit Cards. According to data from the Reserve Bank of India (RBI), there were about 27 million Credit Card users in the country as of October 2016. The figure was about 24 million in June 2016. An increase of about 12.5% in 4 months! Experts predict that this will only go up in 2017 as the demonetisation drive continues. This is based on the fact that there were more people using Credit Card for small purchases in November/December 2016.
Newspaper reports stated that card usage for transactions of less than Rs. 500 rose by a whopping 65% in November. Usage of Credit Cards went up by 40%. What’s more? With digital benefits for card payments, who wouldn’t want to use Credit Cards? You get cashback for card payments made for your fuel, train tickets booked online, and Insurance purchased online, among others.
Additional Reading: Finance Minister Arun Jaitley Unveils Slew Of Online Payment Benefits.
Benefits such as these will ensure that more and more people take to Credit Cards in 2017. Also, reports are doing the rounds that there is going to be a ‘cash tax’ for cash withdrawals. This will only push people more towards Credit Cards.
More People Borrowing Money
Do you know that loan rates have dropped by more than 2% in the past year? Yes! This is for all loans including Car Loans, Home Loans and Personal Loans. This means that loans are becoming affordable for a number of people. Do you know that this will increase loan eligibility for a number of people?
Now, how does drop in interest rates increase your eligibility? Let us explain. Suppose your income is Rs. 50,000 and you need a loan for Rs. 20 lakh. Earlier with interest rates at 11%, your EMI would have come to Rs. 20,643 per month. Most lenders might be reluctant to dish out a loan with an EMI that is close to 41% of your take-home pay. But now, with interest rates at 8%, your EMI comes to Rs. 16,728, which will be about 33% of your take-home salary. Lenders will be comfortable giving you a loan and you also have the option of shopping across lenders as your eligibility for the loan has gone up.
What’s more, better eligibility means that you can bargain for the best terms and rates. Even those you were hesitant to take loans earlier might come forward to take them as interest rates have started falling significantly. This is precisely the reason why more and more people might take loans in 2017.
More Mutual Fund Investors
Fixed Deposit rates have dropped from 10% from a year or two ago to below 8% today. In fact, even post office investment rates have dropped in line with Fixed Deposit rates. All fixed-income investors including senior citizens are pretty worried that they might not get great returns going forward. The worst part is that this scenario might continue for the next 2-3 years, at least.
So, people want to look at alternative investments that might give better returns but still be safe. Can you think of any such investments? Debt Mutual Funds, of course! The best of debt funds have been giving 12% every year for the last few years. These funds invest in safe securities such as Government bonds. Even though the risk is a tad bit higher than that of Fixed Deposits, the risks are not as high as those associated with equity Mutual Funds. So, you can invest in them without undue worries.
The number of people investing in Mutual Funds is growing by the day. Don’t believe us? According to data from the Securities Exchange Board of India (SEBI), there were 5.28 crore Mutual Fund folios in India as of December 2016, up from the 4.5 crore 2 years ago. There was an inflow of close to Rs. 3 crore in Mutual Funds last year. This trend is expected to continue this year too. With professional management and low costs, Mutual Funds might be the most sought-after investments in 2017.
More People Buying Gold
Gold prices have come down to the Rs. 2700 per gram levels. You had no idea? Yes, it’s true! Last year, gold prices were close to Rs. 3000 per gram. A further fall in gold prices cannot be ruled out in 2017. If the US starts looking at rising interest rates, gold prices could take a hit. This is because gold is often valued in dollar terms globally. So, the dollar and gold prices move in opposite directions. A stronger dollar will mean lower gold prices. India has always had a robust demand for gold. So, when gold prices fall, Indians are naturally inclined to come forward to buy more of the yellow metal. Given the scenario of lower prices in 2017, more people are likely to invest in gold when prices come down.
More People Seeking Financial Help
With all financial products becoming more affordable and a number of investment avenues opening up, financial knowledge will become important. You need to have the latest updates on what is happening in the financial world if you want to stay ahead of the pack. If you are not great at picking the right loans and investments, your financial health might suffer. Getting professional help might be the best way out. This is why a number of people are now looking for financial planners, reading financial blogs, and comparing loans and investments, before taking financial decisions. According to October 2016 data from the Financial Planning and Standards Board (FPSB) in India, there have been 36,575 enrolments for the ,Certified Financial Planner course since 2002. Most of those certified are in Mumbai, followed by Delhi and Bengaluru. So, professional help is not hard to find. More and more people are now availing financial planning services and this will be the way forward in 2017 too.
So, are you going to follow the herd in 2017? If you decide to, don’t forget to choose the right financial products, investments and the right financial planner after due research. And when it comes to financial products, we are sure you know where you need to go.