Winning Bizness Desk
Mumbai.Over the past decade, the financial behaviour of Indian households has undergone a sharp transformation, with borrowing steadily outpacing savings. Easy access to EMIs, credit cards and loans has made debt a routine part of life. Household financial liabilities have now climbed to 6.2% of GDP, marking the highest level in ten years, reflecting a structural shift in consumption and investment patterns.
Changing savings and debt patterns across households
According to a white paper titled The New Indian Household Balance Sheet by Client Associates, borrowing has been growing faster than savings, particularly in the post-pandemic period. Household debt has expanded at a compounded annual growth rate of 44.6%, indicating a strong appetite for credit. Experts argue that rising debt is not entirely negative, as it also signals improving consumer confidence and expectations of higher future income.
Key shifts highlight weakening financial buffers
The report underlines a steady decline in financial savings alongside a surge in liabilities. Before the pandemic, net financial savings stood at 7.7% of GDP, but this has dropped to 5.2% in FY2024. At the same time, liabilities have risen from 4.1% to 6.2% of GDP. This indicates that households now have less surplus income available for investments after meeting expenses.
- Net financial savings fall to 5.2% of GDP
- Household liabilities rise to decade-high 6.2%
- Borrowing growth outpaces savings significantly
- Investment capacity per Rs 100 declines sharply
Shift towards property and market-linked investments
Another notable trend is the growing preference for physical assets, particularly real estate. The share of physical assets in total household savings has increased from around 58-60% to nearly 70%. At the same time, equity and mutual fund investments have seen a sharp rise, tripling from 4% in FY2020 to 15% in FY2025, indicating a gradual shift towards market-linked instruments despite risk concerns.
Rise in lifestyle-driven borrowing trends
Credit-driven consumption is becoming more prominent, especially among urban households. Borrowing is no longer limited to essential needs but is increasingly used to upgrade lifestyles. Credit cards are witnessing the fastest growth at 25.2%, followed by personal loans growing at 20.1%. Vehicle loans are also expanding steadily, reflecting rising aspirations and consumption demand.
Financial planning steps to restore balance
Experts suggest that households need to rebalance their finances to avoid long-term stress. With a larger portion of savings locked in illiquid assets, maintaining liquidity and reducing high-cost debt is critical.
- Start SIPs for long-term wealth creation
- Prioritise repayment of costly credit card dues
- Build emergency fund covering six months expenses
- Diversify portfolio beyond real estate into equity, debt, gold
The findings highlight a fundamental shift in how Indians manage money, with rising debt and evolving investment preferences shaping the new financial landscape.
