Indians Spend Over Third of Income to Repay Loans

Obligatory spending like loan repayments, insurance premiums tops expenses

- Suneera Tandon

Indians are spending more than 33% of their income towards paying installments on loans, according to a new study from PwC and Perfios that analyzed the spending behavior of more than 3 million tech-savvy consumers.

The report—How India Spends—says the share of individuals paying loan EMIs (equated monthly installments) is highest among upper-mid-level earners and lowest among entry-level earners. Further, those in lower salary brackets are more likely to take loans from informal sources such as friends, family, or local shadow lenders.

Higher penetration of loans in higher-income segments is reflective of higher living expenses as well as rising aspirations to buy premium or luxury goods such as vehicles and fund holidays.

Broadly, the report says Indian households allocate 39% of their income to obligatory expenses (such as loan installments), 32% to necessities, and 29% to discretionary spending, with the latter led by lifestyle purchases and online gaming.