New Delhi: As festive spending peaks and easy credit becomes more accessible, financial experts are sounding alarms over India’s rising household debt. A recent post by personal finance influencer Neha Nagar has reignited debate on the nation’s borrowing habits, revealing that 70% of iPhones in India are bought on loans, while 80% of cars are financed through EMIs — a trend reflecting the country’s growing reliance on debt to sustain aspirational lifestyles.
According to experts, this shift marks a deeper change in India’s financial behaviour — where borrowing is increasingly used to fund consumption rather than asset creation. “The wealthy use loans as leverage to build assets,” finance author Robert Kiyosaki famously said, “while the poor and middle class use them to buy liabilities.” Analysts say this distinction explains why many middle-income households remain trapped in EMI cycles for depreciating goods like gadgets and vehicles, rather than investing in wealth-generating assets.
Good vs. Bad Loans
Financial planners emphasize the importance of distinguishing between productive and unproductive borrowing. “Debt itself isn’t the enemy — ignorance is,” Nagar cautions.
Good loans — such as education loans for skill-based programs, home loans for appreciating assets, and business or upskilling loans that enhance earning potential — can create long-term value. In contrast, loans for luxury consumption, including gadgets, holidays, or high-end cars, often contribute to financial instability and long-term debt traps.
RBI Sounds Warning
The Reserve Bank of India’s Financial Stability Report (December 2024) highlighted a worrying rise in household indebtedness. India’s household debt-to-GDP ratio surged from 26% in June 2015 to 41.9% in December 2024. Although slightly down from 42.9% six months earlier, the trend remains concerning. Even more alarming is the composition shift toward consumption-driven loans. Non-housing retail credit — including credit cards, personal, and consumer durable loans — now accounts for 54.9% of total household debt, while housing loans have dropped to 29%from 36–37% in FY19.
Between March 2021 and March 2025, personal and consumption loans grew at a compound annual rate of 20.4%, underscoring the surge in non-productive borrowing. The RBI, in response, raised risk weights on unsecured loans to 125% in November 2023 to curb credit expansion amid rising loan-to-value ratios and exposure to subprime borrowers. Despite these measures, per capita household debt increased from ₹73.9 lakh in March 2023 to ₹74.8 lakh by March 2025, mainly among high-rated urban borrowers.
Debt-Led Growth Raises Long-Term Concerns
Although NPAs in consumer lending remain low at 1.4%, analysts caution that India’s household savings rate has plunged to a 47-year low, at 5.3% of GDP in FY23. The central bank has warned that while the financial system remains stable, the country’s growing dependence on credit-fueled consumption could undermine long-term economic resilience.
Experts say the “iPhone-on-EMI” trend mirrors a broader cultural and structural issue — a nation financing desires faster than it builds wealth. Unless borrowing shifts toward productive, value-creating purposes, India’s booming consumption story may eventually give way to a debt-driven economic imbalance.
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