Patralekha Chatterjee | Forget GDP Nos., Can Indian Household Incomes Keep Up?

India’s GDP numbers have become a war zone. Economists, statisticians and politicians continue to fiercely contest one another’s methodologies and motives.

But an ordinary Indian does not live inside those figures. She is concerned with whether this month felt easier or harder than the same month last year. The economy arrives at the household not as aggregate growth but as rent, school fees, groceries, medical bills, a son or daughter still waiting for a job, lack of a salary hike or a business doing less well than it used to. She worries whether the family income is keeping pace with the cost of living and whether there are enough savings to pay the EMI or absorb a sudden shock.

I was reminded of this recently while talking to a young man in his early thirties at my neighbourhood café in south Delhi. He worked in finance, lived with his parents and earned a decent salary. He was unmarried, and had no immediate financial anxiety in his own life.

But many of his friends, he said, had taken loans; some had even borrowed to get the latest smartphone or fund a holiday. The young, he said, wanted to live in the “now.” The basic calculation was that things would get better: salaries would rise, careers would progress and tomorrow’s income would take care of today’s borrowing.

But, as a finance professional, he could also see the large “if” lurking behind that assumption. What if salaries did not rise as expected? What if someone was laid off and took months to find another job at the same pay? The EMI would not disappear in the meantime. Nor would the rent, school fees or medical bills. Borrowing helps people aspire and cope with the present. It also assumes that tomorrow will be better.

That conversation brought home what is sometimes missed when the economic debate becomes a contest over headline numbers.

Urban India is changing not only in what people earn and consume, but also in how they finance the lives they want. The city life many Indians want has a price — homes, furnished apartments, vehicles, good education for their children and the other markers of a better life all require money, often long before the hoped-for income has actually materialised. Today, credit is no longer that difficult to obtain for many people. The lending landscape has expanded well beyond traditional banks, making borrowing faster and more accessible than it once was. Loans against gold jewellery have also taken off in a big way in the last few years.

The question therefore is not whether borrowing is necessarily bad. Credit can help people buy homes, build businesses and manage legitimate needs. But what happens when borrowing becomes part of the way people maintain their present standard of consumption on the assumption that their future incomes will keep rising? Given the global turmoil and uncertainties, the nagging big ‘if’ persists. What does national growth feel like for people whose job prospects and incomes are not rising?

According to the Reserve Bank of India’s (RBI) June 2026 Financial Stability Report, India’s household debt has climbed to 45.5% of Gross Domestic Product (GDP) by September 2025. The rise in household borrowing is driven primarily by non-housing retail loans, with consumption-related borrowing a major driver. Non-housing retail loans have climbed to 58.4% of household borrowing by March 2026.

The young finance professional I met was not opposed to borrowing. But he was acutely aware of the assumption built into it. The assumption is that the future will be kinder to the borrower than the present. Salaries will rise. Careers will progress. Employment will continue. A temporary squeeze will remain temporary. But if that chain breaks, the arithmetic changes very quickly. An EMI remains an EMI whether the salary has risen or not, even amid layoffs and a potential spike in AI-related redundancies. What does growth feel like when good jobs are scarce, and incomes stand still for millions?

Arguably, India’s household debt-to-GDP ratio is lower than that of many rich countries, but Indian households have much lower incomes and thinner financial buffers, so a rise in debt can leave them more exposed when income falls or an unexpected expense arrives. In India, a lost gig, a hospital bill or a failed monsoon can still mean a moneylender or a gold loan. Formal household debt is also only part of the picture; informal credit sits on top and does not show up comprehensively in official data. When both rise together, distress can be acute.

If you go by headlines, the debate over India’s gross domestic product is the big story. Equally important is how Indian households are negotiating the economy that the GDP number describes. The increase in household debt has coincided with a fall in net household financial savings, given that people are using larger portions of their income to repay loans. Household financial savings temporarily surged during the Covid pandemic, as lockdowns curtailed consumption, but fell soon after the economy reopened.

Indian families typically saved first, deferred pleasure, spent later. Today, however, as Kotak Mahindra Mutual Fund observed in a recent blog (Dreams on Credit: Prosperity or Peril?), “borrowing has become an increasingly integral part of household finances, fuelled by rising incomes, rapid urbanisation, digital payments, and unprecedented access to formal credit. From home loans and vehicle financing to credit cards, EMIs, and buy-now-pay-later schemes, debt is no longer reserved for major life events; it is becoming a routine tool for managing consumption and aspirations.”

This shift, it noted, “is reflected in the data: household credit in India has grown several times faster than GDP over the past decade, with retail lending emerging as one of the fastest-growing segments of the financial system. Yet as households take on more debt to fund homes, education, consumption, and entrepreneurship, important questions arise about sustainability, financial resilience, and the long-term implications for India’s consumption-driven growth story. Ultimately, the future trajectory of the Indian economy may be shaped as much by the strength of household balance sheets as by headline GDP growth itself.”

The continuing row over India’s GDP will eventually produce another set of arguments, another round of rebuttals and perhaps another correction in the numbers. But the more consequential question will remain outside the statistical debate: whether people can recognise their own economic lives in the country being described to them. Once that recognition becomes difficult, the problem is no longer simply that citizens do not understand official statistics. It is that the statistics have begun to lose their ability to persuade them.