A hidden debt crisis is silently wrecking the dreams of India’s middle class

In 2021, as a result of the pandemic, households across India experienced a sharp rise in overall indebtedness levels.

Rising out-of-pocket medical expenses, crashing incomes, waning savings, higher rental costs and the increase in prices of basic retail consumer goods contributed to this trend – and have continued to.

This has resulted in a consumption slump in low- and middle-income groups in semiurban and urban India.

After pandemic lockdown restrictions were eased, India’s middle-class consumers – who had their salaries credited into their accounts but could not spend any of it on travel –enjoyed a slight uptick in consumption behavior.

Some described this trend as “revenge or pent-up consumption”. It gave an impression of an economic recovery.

But this short wave of optimism did not last long due to deeper structural factors at play. What looked like a rebound was actually the beginning of a deeper and longer-lasting decline in the financial security of India’s middle class – individuals or households with an annual income between Rs 5 lakh and Rs 30 lakh (approximately $6,000-$36,000).

One of the biggest problems affecting middle-income groups is that their incomes have stopped growing at the rate at which their expenses are rising. There is no longer a corelation between productive work and income gains.

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