India is growing fast, but beneath the headline numbers lies a quieter transformation. Households are saving less, borrowing more, and increasingly living life through monthly repayments. The rise of EMIs may be the sharpest mirror of middle-class stress today.

If there is one economic indicator that reflects household comfort more honestly than GDP, it is savings. Indian families have historically saved not because they were wealthy, but because uncertainty demanded it. For health shocks, children’s education, job loss, old age, and the everyday unpredictability of middle-class life. Household savings were India’s invisible strength.

They funded domestic investment, provided resilience, and protected millions from slipping back into vulnerability. When households save well, it signals stability. When they cannot, it signals stress. And that is why the rise of an EMI-driven middle class is not merely a lifestyle shift. It is a governance warning light.

The real question is no longer whether India is growing, but whether Indian families feel secure enough to save, or are being pushed into borrowing simply to live normally.

Decline in Household Savings Over the Last Decade

Over the last decade, India has witnessed a structural thinning of household buffers. The mid-2010s were years when households still acted as the economy’s strongest net savers, building surpluses that quietly financed national growth. But the latest official numbers show a sharp compression.

A Parliamentary reply citing RBI and NSO estimates reveals that household net financial savings were above 7–8% of GDP in the late 2010s, spiked unusually to 11.7% in 2020–21 during the pandemic, and then fell steeply to just 5.0% in 2022–23, 5.2% in 2023–24, and a preliminary 6.0% in 2024–25.

In plain terms, families today are saving far less of national income than they were a decade ago. That is not simply a statistical movement. It is the erosion of household breathing space.

Debt Replaces Savings

At the same time, what has replaced savings is debt. The RBI’s own warnings are telling. Household debt has risen steadily, reaching 41.3% of GDP by March 2025, above its recent average. More importantly, the rise is not driven only by productive asset-building but increasingly by retail consumption credit and unsecured personal loans. This is the architecture of the EMI economy. Households are financing not only homes, but education fees, medical emergencies, gadgets, weddings, even everyday consumption through monthly repayments. The middle class is no longer asking “Can I afford this?” but “Can I afford the EMI?”

EMIs for Survival, Not Just Lifestyle

The popular assumption is that EMIs reflect aspiration, cars, smartphones, lifestyle upgrades. But the deeper reality is more uncomfortable. A growing part of borrowing is not luxury. It is survival. Private school fees, coaching culture, hospital bills, rent deposits, elder care.

These are no longer occasional shocks but structural expenses for many urban and semi-urban households. Even as India has reduced out-of-pocket expenditure in health, from 62.6% of total health spending in 2014–15 to 39.4% in 2021–22, medical costs remain one of the fastest ways to wipe out savings, forcing families toward credit. The EMI economy is therefore not only about consumption. It is about the privatization of essential life costs.

Forces Driving the Shift to an EMI Economy

Several forces have converged to produce this shift. Cost of living pressures have outpaced income comfort for many households, shrinking the surplus left for saving. Post-Covid buffer erosion forced millions to dip into reserves, and many have not rebuilt them. Fintech has made borrowing frictionless.

Personal loans are now easier to access than long-term savings are to accumulate. And asset inflation, especially housing, has turned shelter into a mortgage of future decades. The middle class today lives not in a world of accumulated surplus, but in a world of monthly obligations.

Economic and Social Implications

The implications extend beyond household budgets. India’s growth model has historically relied more on domestic household savings than on foreign inflows. When households save less, the economy becomes more dependent on government borrowing, corporate leverage, and external capital.

Socially, this shift sharpens inequality. Affluent households compound wealth through assets, while middle-income households compound liabilities through EMIs. This creates two Indias, one investing, another servicing debt. A society where households cannot save is a society living closer to the edge.

Governance Questions Raised by the EMI Economy

Ultimately, the rise of the EMI economy forces India to confront an uncomfortable governance question. What does “fastest-growing major economy” mean if families are saving less than they did a decade ago, and borrowing more simply to maintain stability?

A truly strong economy is not one where consumption rises endlessly, but one where households can save without fear, where healthcare does not erase decades of work, where education does not require permanent debt, and where prosperity creates buffers rather than pressure.

A model economy is not defined by headline growth alone. It is defined by household resilience. And the decade-long fall in net financial savings, from above 7–8% of GDP in the late 2010s to around 5–6% today, alongside household debt crossing 41% of GDP, is a signal India cannot afford to ignore. Because the real test of development is not whether markets rally, but whether the average family can plan, protect, and save.

Editor’s Note: This article is part of The Logical Take, a commentary section of The Logical Indian. The views expressed are based on research, constitutional values, and the author’s analysis of publicly reported events. They are intended to encourage informed public discourse and do not seek to target or malign any community, institution, or individual.

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