Household debt must ease before it constrains demand

A flurry of loans taken for consumption rather than asset creation could weigh against growth

- M. SURESH BABU

The aphorism commonly attributed to John F. Kennedy that "a rising tide lifts all boats" refers to the idea that an improved economy will benefit all participants and that economic policy should focus on broad economic efforts. GDP growth and poverty reduction in India draw a striking parallel with this, as our fast-growing economy has shown spectacular success in combating poverty. The government notes the lifting of 171 million people out of extreme poverty as "one of the most remarkable achievements of the past decade." In conjunction with the economy's rapid expansion, this hints at the existence of sizeable domestic demand that can propel growth at a time when external demand is uncertain.

Unconstrained domestic demand is key to retaining the growth momentum required for sustained poverty reduction.