Household Savings Erosion and Credit-Led Consumption: Implications for India’s Long-Term Economic Stability

Abstract

Household Savings Erosion and Credit-Led Consumption: Implications for India’s Long-Term Economic Stability

In the today’s world, self-reliance and self-sufficiency vis a vis sustainability has gained significant importance. In India, Gross domestic savings is contributed by three sectors such as household sector, Private corporate sector and the government. Household sectors save in three forms i.e. Physical assets, financial assets and Gold/Silver etc [1]. Household sector savings contributes majorly about 60 -70% to the gross domestic savings (RBI) followed by corporate sector with the contribution 20-30% and government contributes very negligible part in the gross domestic savings [1]. There is a major concern that household savings are remarkably and continuously falling down i.e. showing hit 5 years low to 28.4% of the GDP and in addition financial liabilities are surged to 6.2% of the GDP in 2024 as per care edge ratings report (The Economic Times, 15th June 2025) [2]. Many developed and emerging developing economies have remarkable savings rate which directly connect with capital formation and further strong economic growth. This paper is trying to showcase the trend of savings, emergence of fintech and its trend in lending. To achieve resilience and sustainability in the economy, India need to keep keen eye on this financial inclusion policies to sustain savings for a longer period.

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