In 2014, Rajan and Swati Singh were the picture of middle-class aspiration. With a modest two-bedroom flat on the outskirts of Pune, steady jobs and a daughter in a good school, they believed they had secured a stable future. Their combined income of ₹18 lakh a year placed them comfortably within India’s “secure” middle class. They budgeted carefully, saved diligently and even planned an annual holiday.
A decade later, in 2025, that stability has crumbled. Swati’s school froze increments three years ago. Rajan’s IT firm replaced annual hikes with “performance-linked bonuses” that rarely materialise. Food and grocery bills have nearly doubled, school fees are up 80 per cent, and their savings have evaporated. To bridge the gap, they now depend on credit cards and personal loans. “We’re not trying to live lavishly,” says Swati. “We just want to maintain what we have, but every month it’s getting tougher.”
Their story mirrors the new reality of India’s middle class: anxious, indebted and uncertain. Behind the glossy narrative of record GDP numbers lies a quieter crisis: stagnant incomes, runaway living costs, depleted savings and rising dependence on loans to survive. The households that once powered India’s consumption and confidence now sustain themselves on borrowed money. The optimism that defined post-liberalisation India has given way to quiet exhaustion.
The Reserve Bank of India’s Financial Stability Report (June 2025) paints the scale of this transformation. India’s household debt-to-GDP ratio has more than doubled in a decade — from 20 per cent in 2014 to 41.9 per cent by December 2024. The average per capita debt now stands at ₹4.8 lakh, up 23 per cent from ₹3.9 lakh in just two years.
What was once a culture of thrift has turned into a culture of credit. Ten years ago, families borrowed to buy homes, fund education or invest in businesses. Today, they borrow to buy groceries, pay bills and hold on to a middle-class lifestyle. Over 70 per cent of urban middle-class households have at least one active loan, and more than half of this debt is for consumption, not investment. As of March 2025, non-housing retail loans such as personal, credit card and vehicle loans account for 55 per cent of all household borrowings. Housing loans, by contrast, make up just 29 per cent.
Economist Reetika Khera calls this the shift from “constructive” to “destructive” debt. “The Indian middle class isn’t growing richer; it’s growing more indebted,” she says. “Families are using credit to maintain the illusion of stability, not to expand their wealth.”
The reasons are not incidental; they’re structural. Inflation has hit hardest where middle-class spending is concentrated. Between 2015 and 2025, CPI inflation averaged about 5 per cent, lower than in the previous decade, but that number hides the real pain. Look closer: segmental inflation for essentials such as food, housing, healthcare and education has been far higher and risen faster.
Milk, cereals and vegetables have nearly doubled in price. Medicines and medical consultations have become unaffordable for many. Housing costs in major cities have shot up between 70 and 100 per cent. With public schools and hospitals failing to deliver, families have little choice but to turn to expensive private options.
If inflation eats into wallets, wage stagnation empties them. According to the Centre for Monitoring the Indian Economy (CMIE), real wage growth in urban India has averaged just 1-2 per cent over the past five years, which is far below inflation. Real incomes for salaried workers are now lower than they were in 2019.
Even white-collar professionals haven’t been spared. Average pay hikes in IT, finance and manufacturing have dropped from 9 per cent in 2019 to around 5-6 per cent in 2024. “The problem isn’t just that prices are rising,” says CMIE’s Mahesh Vyas. “It’s that incomes aren’t.”
The result? Families are increasingly living beyond their means by relying heavily on credit. And that is happening not by choice, but by necessity. Their rising debt doesn’t reflect extravagance; it reflects a desperate attempt to hold on to the lifestyle they once could afford.
The average household now juggles three to four EMIs each month. “Easy credit has masked wage stagnation,” notes Prof Soumen Chattopadhyay of JNU. “It creates an illusion of affluence. People feel richer because they can spend more, but they’re spending their future income today.”
India’s debt levels remain lower than in rich economies, but they’re rising at an alarming speed. South Korea’s household debt-to-GDP ratio is 90 per cent, the UK’s 76 per cent, and India’s only 42 per cent, yet the growth rate is twice as fast. The RBI has cautioned that “household debt is not a risk until it becomes one. But when it does, it spreads fast.”
The early signs are already visible. TransUnion CIBIL data show that defaults on unsecured personal loans have more than doubled, from 1.4 per cent in 2021 to 3.2 per cent in 2024. The sharpest increase has come not from the poor but from the salaried middle, those earning ₹6-15 lakh a year. Among borrowers under 35, defaults now account for 42 per cent of all cases.
The slowdown in consumption, the very engine of India’s growth story, is now palpable. “When your income goes to pay yesterday’s expenses, you stop spending tomorrow,” warns Khera.
The middle class, which makes up about 31 per cent of India’s population, drives over 60 per cent of private consumption and contributes 70 per cent of direct tax revenues. When their budgets buckle, the entire economy feels the tremor.
Private consumption growth, once 7.1 per cent in FY2019, fell to 3.8 per cent in FY2024. Sales of mid-range cars, two-wheelers and consumer durables, once the barometers of aspiration, have stagnated. Even as GDP breaks records, the everyday economy feels anaemic. “The middle class once powered India’s growth miracle,” says former Chief Economic Adviser Arvind Subramanian. “Now it risks becoming its biggest drag.”
The clearest sign of this stress is the collapse in savings. India’s net household financial savings are now at their lowest in nearly 50 years. According to CRISIL, the gross domestic savings rate has fallen to 29.7 per cent of GDP in 2022–23, down from 34.6 per cent in 2011–12. The Finance Ministry estimates household savings at just 5.1 per cent of GDP, compared to 7.6 per cent before the pandemic.
Meanwhile, inequality has deepened. Between 2014 and 2022, the top 1 per cent of earners captured 22.6 per cent of national income and 40 per cent of total wealth, according to the World Inequality Lab.
The story of India’s middle class is no longer one of upward mobility; it is now one of survival. A booming economy propped up by mid-income households sinking deeper into debt is a contradiction that cannot last. The crisis may not look spectacular, as there are no market crashes or bank runs, but it is corrosive, slow and spreading. Unless national prosperity begins to translate into personal security, the middle class, once the bedrock of India’s rise, may soon become its breaking point.
(The author is a Delhi-based journalist and executive editor of New Delhi Post)
