Our economic habits have been changing rapidly in the last decade. EMI, credit card and home loan have now become a part of life. Financial liabilities of Indian households have increased to 6.2% of GDP, the highest level in the last decade. According to Client Associates’ white paper ‘The New Indian Household Balance Sheet’, Indians’ borrowing is now outpacing their savings. Household debt has increased at a CAGR of 44.6% in the post-pandemic period. Economic experts believe that increase in debt is not always negative. It is also a sign of growing confidence and expectation of better future earnings. What is the big change? – Savings are declining – Before the pandemic, net financial savings stood at 7.7% of GDP. It will come down to 5.2% in FY 2024. That means out of every Rs 100, less money is left for investment. – Debt is rising – Household financial liabilities have increased from 4.1% of GDP (before the pandemic) to 6.2% now, the highest level in a decade. – Investment in property increased – The share of physical assets (mainly real estate) in total savings has increased from 58-60% to 70%. – Boom in equity-mutual funds- Investment in equity and mutual funds has tripled from 4% in FY 2020 to 15% in FY 2025. Household debt to GDP ratio at 6.2%; At the highest level in the last decade. 44.6% annual growth rate of lending after the pandemic; Speed over savings. Net fiscal savings against GDP at 5.2%; Near decade lows. (Source: Client Associates – The New Indian Household Balance Sheet (2025) Credit card, personal – vehicle loan debt has grown at the fastest pace in the last decade Credit card craze – now loans are being taken not just for needs but also for a better lifestyle. This segment is growing fastest at the rate of 25.2%. Personal Loan – Personal for lifestyle upgrade and consumption Loans have seen a growth of 20.1%. 70% of the total household savings are now going into physical assets, which is leading to shortage of cash in hand. 1: Start SIPs: Regular investments in equities and mutual funds will create long-term wealth. 2: Credit cards and personal loans cost the most. 3: Create a 6 month emergency fund, keep it in a liquid FD or debt fund. 4: Diversify your portfolio: keep a balance of equity, debt and gold.
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Indians on the path of borrowing, 10 year record broken: Increasing trend of personal loans and credit cards for lifestyle and assets
