According to a recent report, India’s household debt levels reached an all-time high of 40% of Gross Domestic Product (GDP) by December 2023.

Key highlights:

  • Net financial savings dropped to their lowest level, around 5% of GDP, by December 2023 as per a  report from  financial services firm Motilal Oswal.
  • The Reserve Bank of India (RBI) estimated that households’ net financial savings dropped to 5.1% of GDP in 2022-23, a 47-year low.
  • The first revised estimates of national income for 2022-23 showed that net financial savings were revised  slightly to 5.3% of GDP.  However, this is still the lowest in 47 years and weaker than the average of 7.6% of GDP recorded between 2011-12 and 2019-20
  • Net financial savings were estimated to remain around 5% of GDP for the year  2023-24.
  • While households’ gross financial savings increased slightly, financial liabilities also rose to a similar extent also rose by a similar extent to 5.8% of GDP, the second-highest in the post-Independence period..
  • Although households’ physical savings reached a decade-high in 2022-23, their total savings were at a six-year low level of 18.4% of GDP.
  • India’s Gross Domestic Savings (GDS) eased to 30.2% of GDP, lower than the range seen in previous years. 
  • The report described the fall in net financial savings of households as ‘dramatic’, reflecting the severity of the situation.

Key terms:

  • GDP: Total value of goods & services produced in a country in a year.
  • Gross Domestic Savings (GDS): Money saved within a country (GDP minus consumption). This is available for investment.
  • Gross Financial Savings: A subset of GDS focusing on savings in financial instruments (stocks, bonds, etc.).
  • Net Financial Savings: Gross Financial Savings minus depreciation (consumption of existing assets). This shows the true increase in wealth.
  • Physical Savings: The part of GDS not invested financially. This represents the increase in the value of physical assets (buildings, machinery).

Possible Causes and factors:

  • The Finance Ministry argued that the decrease in financial savings was due to households taking loans to buy real assets like homes and vehicles, which they interpreted as a sign of confidence in future income prospects rather than financial distress.
  • Unsecured personal loans continued to grow at the fastest pace within household debt, followed by secured debt, agricultural loans, and business loans.
  • Factors Contributing to Low Savings include Weak income growth, coupled with robust consumption and growth in physical savings


  • Financial Vulnerability: High debt exposes households to financial shocks, potentially leading to defaults and impacting lenders.
  • Reduced Consumption: Debt repayments strain disposable income, hindering economic growth.
  • Macroeconomic Instability: Rising interest rates can trigger defaults and financial instability.
  • Debt Trap: Easy access to unsecured loans can trap borrowers in a cycle of debt.
  • Increased Inequality: Debt burdens often disproportionately affect low- and middle-income households. This can exacerbate income inequality and social tensions.

Way Forward:

  • Financial Literacy Boost: Empower citizens to make informed borrowing decisions.
  • Lending Guardrails: Regulate lending practices to prevent excessive household debt.
  • Debt Repayment Support: Implement policies that help households manage and repay debt.
  • Safety Net Strengthening: Bolster social safety nets to protect vulnerable borrowers.

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