THE DEBT EXPLOSION IN MIDDLE-CLASS INDIA

Over the past decade, a silent crisis has been unfolding in India's middle class.

- SAURABH MUKHERJEA & NANDITA RAJHANSA

While incomes have stagnated and job opportunities have dwindled, borrowing has surged at an unprecedented rate.The Reserve Bank of India (RBI) has highlighted that net household savings in India (i.e., household savings less household borrowings) as a percentage of income is at its lowest since 1977. The reason for this figure plunging over the past five years is not so much falling savings; it is soaring financial liabilities that are to blame. Indian households have become world champions in borrowing money-lots of it, nonstop and at high cost.

Until 2019, India's non-housing household debt remained broadly aligned with that of its international peers. Now, however, Indians carry one of the highest debt burdens in the world, excluding mortgages-surpassing even consumption-heavy economies like the United States and debt-fuelled growth stories like China.