The market regulator, the Securities and Exchange Board of India (SEBI) has proposed significant changes to the methodology used for calculating household savings in the Indian securities market. In its latest working paper, SEBI suggests including investments in Alternative Investment Funds (AIFs) as part of the household income, a move that could provide a more comprehensive picture of household financial health.

Currently, the Reserve Bank of India (RBI) uses data from SEBI and the Association of Mutual Funds in India (AMFI) for calculating household investments in mutual funds. In contrast, estimates are used for equity and debt segments. However, this methodology does not fully capture the savings patterns of households, particularly those involving newer financial instruments such as AIFs.

SEBI's proposal addresses these gaps by revising the computation approach to include granular data on household investments in AIFs, REITs, InvITs, and other segments not covered by the existing methodology. The proposed changes are expected to improve the quality and accuracy of data by capturing actual investment values and covering currently excluded segments.

The revised methodology is set to include data from both primary and secondary markets, accounting for net investments through daily computations aggregated annually. For the first time, SEBI plans to introduce data on AIF investments from FY 2024-25, although historical data will not be available.

SEBI's efforts align with the evolving savings patterns of Indian households, reflecting broader participation in diverse financial products. This change will also help align India's data reporting with international standards, such as the System of National Accounts 2008, which includes various non-profit institutions and individual investors.

As SEBI moves forward with these changes, it is anticipated that including AIFs in household income calculations will provide a more transparent and holistic view of the financial landscape, ultimately supporting better policy decisions and market oversight. Click to read the consultation paper here.