India’s households, long regarded as cautious savers, are quietly taking on record levels of debt. According to the Reserve Bank of India’s Financial Stability Report, household debt in India was 42% of the GDP at the end of 2024, up from just 26% in 2015. Which means that in absolute terms the total debt is nearly three times bigger. The average debt per individual has jumped 23% in just two years. This means the average debt per person is rising at twice the speed of national income.

It has risen from Rs 3.9 lakh in 2023 to Rs 4.8 lakh by March 2025. More than half of this borrowing, i.e., about 55%, comes from non-housing retail loans such as credit card dues, personal loans, auto loans, and gold loans, while traditional home loans make up only about 29% of total household debt. Thus, an increasing share of household borrowing is being used not to build assets but simply to make ends meet. The middle-class and lower-middleclass families who prided themselves on thrift and saving for children’s education, gold jewellery, or a small home are borrowing to spend on current consumption.

A rising debt-to-GDP ratio, especially if the borrowing is driven by consumption rather than productive investment, will weaken the foundation of India’s long-term sustained growth. India’s debt ratio is still much lower than other developed economies. For instance, in Australia and Canada the household debt is more than 100 per cent of the GDP. But unlike India, these two countries have generous social security and old-age-assured income security, reducing their households’ need to have high savings. In the US, too, the ratio of household debt to GDP is 75%, and in China it is 63%.

The memory of the financial crash and crisis........

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