<p>‘The real trap isn’t inflation or taxes – it’s the belief that a Rs-10 lakh car is a just reward for hard work.’</p>.<p>This prompting statement by Monish Gosar, a Mumbai-based data scientist, became a viral LinkedIn post recently. It shed light on the escalating financial challenges faced by India’s middle-class families. Historically recognised for their financial prudence and strong savings culture, these households are now increasingly weighed down by growing debt.</p>.<p>So, what defines the middle class in India? While the definition can be complex, the National Council for Applied Economic Research (NCAER) classifies middle-class households as those earning between Rs 5 lakh and Rs 30 lakh annually. Just a few years ago, researchers predicted that this demographic group would expand significantly, from 31% of the population in 2021 to 61% by 2047. The projections were optimistic, indicating a middle-class population of one billion by 2047. However, recent trends suggest that this projected growth may now be at risk. Because debt among middle-class families is rising sharply. Once considered a key engine of economic growth, this class is now increasingly burdened by loans and financial stress. The average income for middle-class earners has stagnated at around Rs 10.5 lakh per year for over a decade. When adjusted for inflation, the real value of this income has declined.</p>.<p>According to a recent report from the Reserve Bank of India (RBI), household debt constitutes 42.9 per cent of India’s GDP at current market prices. Additionally, an analysis by Morgan Stanley reveals that household debt rose from 23.1 per cent of GDP to 23.9 per cent in early 2025. Meanwhile, household savings, once a significant strength, are on the decline. Data from the National Statistical Office shows that households’ share of total savings has fallen from 68.2 per cent in 2011-12 to 60.9 per cent today. </p><p>Their share of GDP decreased from 23.6 per cent to 18.4 per cent during the same period. Although people are still saving, their financial liabilities have increased at a faster rate, resulting in a decline in the net savings-to-GDP ratio from 7.4 per cent to 5.3 per cent. This shows that while individuals are saving, they are also borrowing more and accumulating greater debt.</p>.<p>It is widely accepted that the income levels of regular salaried employees in India have increased in recent years. According to data published by the Ministry of Statistics and Programme Implementation (MOSPI) in 2024, average wages in India rose to Rs 17,997.54 per month from 2017 to 2024, culminating in an all-time high of Rs 21,103 per month in the second quarter of 2024. However, as the month draws to a close, they often find themselves stressed about managing their EMIs and credit card payments. The issue extends beyond stagnant wages and rising prices; an increasing number of people are relying on loans and credit cards for everyday purchases, ranging from smartphones and appliances to groceries and fuel. What was once considered “luxury borrowing” for significant investments, such as homes or vehicles, has now become a common practice for everyday necessities.</p>.<p>This ‘lifestyle inflation’ happens when people spend more as their income increases. A salary raise often leads to an upgraded lifestyle, and over time, spending can exceed earnings. With Buy Now Pay Later (BNPL) schemes, zero-cost EMIs, and easy credit accessed through apps, many end up spending more than they can afford. Debt builds up gradually until their EMIs take up a third or more of their income. The concept of borrowing has shifted from being a backup to a default means of meeting their daily transactions.</p>.<p><strong>Missing financial discipline</strong></p>.<p>One of the major reasons for this rising debt is the pressure from social <br>media. Even individuals in the top 10% of earners in India often feel “poor” while scrolling through their social media accounts. They start comparing their lives to those of strangers, creating the illusion that everyone else is doing better. This ‘competition’ incurs significant costs. As expenditures increase, long-term savings often become <br>secondary. Financial experts emphasise that spending more on lifestyle reduces future savings, and it is well-known <br>that the early years are critical for wealth generation.</p>.<p>According to the RBI, currently, 5 to 10% of India’s middle-class community is stuck in a debt trap. This financial pressure is leading to something even more serious – rising suicide cases. According to the National Crime Records Bureau (NCRB) statistics, suicides due to financial stress rose from 4,970 in 2018 to over 7,000 in 2022, increasing from 3.4% to 4.1% of total suicides. This issue isn’t limited to farmers or the poor; it’s affecting salaried urban families as well. A study conducted in Surat found that 19% of the 1,866 suicides between 2022 and 2024 were due to financial problems. Among those individuals, 90% were already in debt.</p>.<p>This crisis isn’t solely about policy or inflation; it’s also deeply rooted in personal choices. There’s a clear gap between people’s expectations and their economic reality. Furthermore, the shift to the new tax regime has contributed to this situation. While the old tax regime promoted savings through various deductions, effectively encouraging a culture of financial discipline, the new regime simplifies tax filing and allows individuals more freedom in choosing between saving and spending.</p>.<p>However, this autonomy, combined with evolving lifestyles and the desire to remain visible and relevant among peers, has led to a surge in unnecessary consumption. Social perceptions and the pressure to maintain a certain standard of living are significantly contributing to rising financial strain. Although there may be structural challenges within the economy, true transformation begins with personal accountability. It is not solely about the amount you earn, but rather how effectively you manage that income to reach your objectives. Wealth is not created only through income; it is cultivated through discipline.</p>.<p><em>(The writers are assistant professors at the Department of Economics, CHRIST Deemed to be University, Bengaluru)</em></p>
<p>‘The real trap isn’t inflation or taxes – it’s the belief that a Rs-10 lakh car is a just reward for hard work.’</p>.<p>This prompting statement by Monish Gosar, a Mumbai-based data scientist, became a viral LinkedIn post recently. It shed light on the escalating financial challenges faced by India’s middle-class families. Historically recognised for their financial prudence and strong savings culture, these households are now increasingly weighed down by growing debt.</p>.<p>So, what defines the middle class in India? While the definition can be complex, the National Council for Applied Economic Research (NCAER) classifies middle-class households as those earning between Rs 5 lakh and Rs 30 lakh annually. Just a few years ago, researchers predicted that this demographic group would expand significantly, from 31% of the population in 2021 to 61% by 2047. The projections were optimistic, indicating a middle-class population of one billion by 2047. However, recent trends suggest that this projected growth may now be at risk. Because debt among middle-class families is rising sharply. Once considered a key engine of economic growth, this class is now increasingly burdened by loans and financial stress. The average income for middle-class earners has stagnated at around Rs 10.5 lakh per year for over a decade. When adjusted for inflation, the real value of this income has declined.</p>.<p>According to a recent report from the Reserve Bank of India (RBI), household debt constitutes 42.9 per cent of India’s GDP at current market prices. Additionally, an analysis by Morgan Stanley reveals that household debt rose from 23.1 per cent of GDP to 23.9 per cent in early 2025. Meanwhile, household savings, once a significant strength, are on the decline. Data from the National Statistical Office shows that households’ share of total savings has fallen from 68.2 per cent in 2011-12 to 60.9 per cent today. </p><p>Their share of GDP decreased from 23.6 per cent to 18.4 per cent during the same period. Although people are still saving, their financial liabilities have increased at a faster rate, resulting in a decline in the net savings-to-GDP ratio from 7.4 per cent to 5.3 per cent. This shows that while individuals are saving, they are also borrowing more and accumulating greater debt.</p>.<p>It is widely accepted that the income levels of regular salaried employees in India have increased in recent years. According to data published by the Ministry of Statistics and Programme Implementation (MOSPI) in 2024, average wages in India rose to Rs 17,997.54 per month from 2017 to 2024, culminating in an all-time high of Rs 21,103 per month in the second quarter of 2024. However, as the month draws to a close, they often find themselves stressed about managing their EMIs and credit card payments. The issue extends beyond stagnant wages and rising prices; an increasing number of people are relying on loans and credit cards for everyday purchases, ranging from smartphones and appliances to groceries and fuel. What was once considered “luxury borrowing” for significant investments, such as homes or vehicles, has now become a common practice for everyday necessities.</p>.<p>This ‘lifestyle inflation’ happens when people spend more as their income increases. A salary raise often leads to an upgraded lifestyle, and over time, spending can exceed earnings. With Buy Now Pay Later (BNPL) schemes, zero-cost EMIs, and easy credit accessed through apps, many end up spending more than they can afford. Debt builds up gradually until their EMIs take up a third or more of their income. The concept of borrowing has shifted from being a backup to a default means of meeting their daily transactions.</p>.<p><strong>Missing financial discipline</strong></p>.<p>One of the major reasons for this rising debt is the pressure from social <br>media. Even individuals in the top 10% of earners in India often feel “poor” while scrolling through their social media accounts. They start comparing their lives to those of strangers, creating the illusion that everyone else is doing better. This ‘competition’ incurs significant costs. As expenditures increase, long-term savings often become <br>secondary. Financial experts emphasise that spending more on lifestyle reduces future savings, and it is well-known <br>that the early years are critical for wealth generation.</p>.<p>According to the RBI, currently, 5 to 10% of India’s middle-class community is stuck in a debt trap. This financial pressure is leading to something even more serious – rising suicide cases. According to the National Crime Records Bureau (NCRB) statistics, suicides due to financial stress rose from 4,970 in 2018 to over 7,000 in 2022, increasing from 3.4% to 4.1% of total suicides. This issue isn’t limited to farmers or the poor; it’s affecting salaried urban families as well. A study conducted in Surat found that 19% of the 1,866 suicides between 2022 and 2024 were due to financial problems. Among those individuals, 90% were already in debt.</p>.<p>This crisis isn’t solely about policy or inflation; it’s also deeply rooted in personal choices. There’s a clear gap between people’s expectations and their economic reality. Furthermore, the shift to the new tax regime has contributed to this situation. While the old tax regime promoted savings through various deductions, effectively encouraging a culture of financial discipline, the new regime simplifies tax filing and allows individuals more freedom in choosing between saving and spending.</p>.<p>However, this autonomy, combined with evolving lifestyles and the desire to remain visible and relevant among peers, has led to a surge in unnecessary consumption. Social perceptions and the pressure to maintain a certain standard of living are significantly contributing to rising financial strain. Although there may be structural challenges within the economy, true transformation begins with personal accountability. It is not solely about the amount you earn, but rather how effectively you manage that income to reach your objectives. Wealth is not created only through income; it is cultivated through discipline.</p>.<p><em>(The writers are assistant professors at the Department of Economics, CHRIST Deemed to be University, Bengaluru)</em></p>
