Restaurant worker Navjot Singh, 25, wanted an iPhone he could not afford on his monthly salary of 50,000 Indian rupees ($521). A small loan made the purchase possible, and a PlayStation, television set and other loans followed. Soon, repayments were eating up nearly half of his paycheck. To keep up, Singh cut back on eating out and clothing, canceled his gym membership and gave up snooker. "Monthly installments seem convenient at first, but you don't realize how quickly you can get sucked into a cycle of repayments," he said.
Singh's experience points to a vulnerability beneath India's consumption boom, which has helped drive growth in the world's fastest-expanding major economy. Household borrowing surged 36% in the year through March, taking consumer debt to a record 46% of gross domestic product, according to central bank data. Excluding mortgage debt, Indian consumers are among the most constrained in the world, according to CLSA estimates.
Consumers now face their biggest test as interest rates rise. The Reserve Bank of India's 5.5% benchmark rate is among the highest in Asia after its first increase in nearly four years last month, and economists expect another 75-100 basis points of hikes. Saurabh Mukherjea, founder of Marcellus Investment Managers, warned the spending boom will "face its first big reality check" and cited three risks: multiple rate hikes, a slump in gold prices, since many families use gold as loan collateral, and white-collar job losses.
The squeeze is already visible. Borrowing rose roughly four times as fast as disposable income in 2025-26, while real salary gains were modest. Borrowing against gold jumped nearly 45% in the year through March, almost three times the pace of overall bank credit. Vishal Gaikwad, who lost his job during the Covid pandemic, now takes food delivery gig work after his office shift to service four loans. "I will repay every rupee I borrowed," he said.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing