Indians Save Less, Borrow More: Understanding the New Financial Reality
India’s financial landscape is changing rapidly. A decade ago, Indians were known for high savings and conservative spending. But today, the numbers tell a different story — household savings have dropped to a 47-year low, while borrowing and EMI-driven consumption are at record highs.
From credit cards to personal loans, consumer borrowing has become a normal part of everyday life. But why is this happening? And what does it mean for the country’s financial future?
1. The Decline of Household Savings in India
India’s household savings rate has been steadily falling over the last few years.
Some key reasons include:
Rising cost of living
From rent to groceries, every essential has become significantly costlier. Middle-income households end up spending most of their income on day-to-day expenses.
Lifestyle-driven spending
Online shopping, instant discounts, BNPL (Buy Now, Pay Later), and easy EMIs have created a culture of spending first and thinking later.
Lower real income growth
Income is not increasing at the same pace as inflation. As a result, families have less money left to save.
Urbanisation and nuclear families
Living independently in big cities often means higher expenses and lower savings.
2. A Surge in Borrowing: Why Indians Are Taking More Loans
While savings are falling, borrowing is rising at an all-time high — especially for:
- Personal loans
- Credit cards
- Two-wheeler and car loans
- Small business loans
- Instant digital loans
Easy access to loans
Digital lending platforms approve loans within minutes. No heavy paperwork, no long waiting. This convenience has encouraged more people to borrow.
Aspirational lifestyle
People want better houses, premium smartphones, bikes, holidays, and lifestyle upgrades — often financed through EMIs.
Growing dependence on credit for emergencies
Most Indians don’t have an emergency fund. When a financial crisis hits, they rely on loans.
3. The Dangers of Saving Less and Borrowing More
This financial imbalance can lead to:
Debt trap
Multiple EMIs, high-interest credit card dues, and constant refinancing can lead to long-term financial stress.
Dependency on loans
Instead of savings, loans become the first solution for any financial need.
Low financial stability
Households with low savings struggle during medical emergencies, job loss, or market downturns.
4. How Indians Can Fix the Problem
Build an emergency fund
Ideally 3–6 months of expenses.
Follow the 50-30-20 rule
- 50% Needs
- 30% Wants
- 20% Savings
Avoid unnecessary EMIs
Buy only what you can afford.
Use credit cards wisely
Pay full bill every month to avoid interest.
Invest regularly
SIPs, RD, FD, gold, and safe long-term instruments help build financial discipline.
Frequently Asked Questions (FAQs)
1. Why are Indians saving less today?
Indians save less mainly due to rising living costs, lifestyle expenses, and global inflation. Younger generations also prefer spending on experiences and gadgets rather than long-term savings.
2. Why is borrowing increasing so fast in India?
Because loans have become extremely easy to get. Digital lending apps offer instant approvals, small-ticket loans, and minimal documentation — attracting more borrowers.
3. Is borrowing always a bad thing?
Not at all. Borrowing is helpful when used for productive purposes like business, education, or home buying. It becomes harmful when used for lifestyle spending without repayment planning.
4. How much should an average Indian save?
Ideally, at least 20% of monthly income should be saved and invested. More if possible.
5. What is the biggest financial mistake Indians make today?
Using credit cards or loans for lifestyle expenses without understanding interest rates — leading to a debt cycle.
Conclusion
India’s shift from a “saving-first” mindset to a “borrowing-first” mentality is clear. While loans can help fulfil dreams and handle emergencies, long-term financial health depends on disciplined saving and smart borrowing.
Balancing both is the key to a secure financial future.