The debt mountain behind middle class' retail itch

In India, a growing number of middle-class consumers are finding themselves trapped in a cycle of debt as they chase a consumer spending boom driven by affordable loans and increased credit access. Restaurant worker Navjot Singh took out loans for a smartphone, gaming console, television, and even a wine course, leading to his monthly repayments consuming nearly half of his paycheck. Singh's story highlights a vulnerability beneath India's outward-facing economic growth.

While household borrowing surged 36% in the year through March, reaching a record 46% of the country's GDP, Indian consumers remain among the most constrained in the world, excluding mortgage debt, according to estimates from brokerage CLSA. With interest rates starting to rise, economists warn that the country's spending party could soon face its first major reality check.

Saurabh Mukherjea, author of Breakpoint: The Crisis of the Middle Class and the Future of Work, warns of three potential triggers that could end the consumer boom: multiple interest rate hikes, a drop in gold prices, and white-collar job losses. Already, borrowing has risen roughly four times faster than disposable income in 2025-26, and average earnings for regular salaried workers have increased by less than 4% in real terms over the past three years.

The cycle of borrowing is particularly evident among those who have lost their jobs, such as Vishal Gaikwad, a 35-year-old working-class man from Mumbai who now juggles multiple loans while working two jobs and supporting his ailing mother. As interest rates climb, Indian consumers face a critical test that could spell the end of the current spending boom.