The debt explosion in middle-class India

Dear reader, as 2025, a year of global tumult and volatility, rolls by, Mint's reporters and columnists look around the corner on what is coming in 2026—to help you know what to expect and prepare for it. Tell us what you think at [email protected].Over the past decade, a silent crisis has been unfolding in India's middle class.

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, non-stop 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.The covid pandemic marked an inflection point, and unlike other nations where borrowing subsequently moderated, India’s trajectory continued its steep ascent.

Today, non-housing household debt as a percentage of household income stands at 32% in fiscal year 2025 (FY25), up from 23% in FY17. For borrowers caught in this cycle, the mathematics are brutal: nearly 40% of annual income is now consumed by debt servicing alone.What makes this borrowing binge particularly alarming is its composition.