Raging inflation, stagnant wages forcing households into debt: Congress

Household debt touched an all-time high of 40% of the gross domestic product (GDP) in December 2023, while net financial savings dropped to around 5% of the GDP

Congress President Mallikarjun Kharge. File. | Photo Credit: ANI

The alarm bells are ringing for the Indian economy, but Prime Minister Narendra Modi has not heard them, the Congress said on April 9.

The principal Opposition party’s statement was in response to a news report in The Hindu that quoted the findings of leading financial services firm Motilal Oswal on India’s growing household debt.

According to the report, household debt touched an all-time high of 40% of the gross domestic product (GDP) in December 2023, while net financial savings dropped to around 5% of the GDP.

Debt burden

“Modi government is the Vishwaguru in messing up the economy. He talks about Parivar, but the debt burden on the country’s families has reached the highest level in history. The domestic savings of the country’s families have been reduced to the lowest in nearly 50 years,” Congress President Mallikarjun Kharge said in a post on X.

“Women, youth, farmers, the poor, Dalits, tribals, and backward classes are all bearing the brunt of the economic ruin caused by the Modi government. When Congress introduces a guarantee to compensate them for income, medicine, and education in its manifesto, Modi ji turns to false allegations. Why do you think that is? Because the truth of their terrible failures is now visible to the public,” Mr. Kharge added.

Party general secretary Jairam Ramesh said the Congress’ ‘Nyay Patra’ is a direct response to the “failures” of the government and asserted that the “dus saal anyay kaal” [10 years of injustice] ends on June 4.

“All the alarm bells are ringing for the Indian economy, but only Mr. Modi does not seem to hear them. Under his leadership, India has witnessed record levels of unemployment, high inflation, declining real wages, widespread rural distress, and dramatic increases in inequality,” Mr. Ramesh said in a statement, referring to the report by the financial services firm.

“Although Modi Sarkar would be loath to admit it, the fact is that stagnant wages and high inflation have forced households to take loans just to get by,” he noted, adding, “far from saving money, Indian households are slowly sinking into debt.”

Quoting the report, Mr. Ramesh said the “dramatic” fall in savings is due to weak income growth, which explains why both private consumption and household investment growth have remained markedly subdued in 2023–24.

Dismal savings

“The authors point out that the ‘dismal’ savings rate is ‘not an anomaly’, and that net financial savings have remained at 5% of GDP for the first nine months of 2023–24. Reduced savings means less capital available for business and government investments and increased reliance on volatile foreign capital,” he said.

He said the report confirms that an increase in unsecured personal loans is to blame for high levels of household debt, not home loans or vehicle loans, as the Finance Ministry would like one to believe.

“The findings of this report add to the laundry list of the Modi government’s economic failures: Near-zero growth in employment: just 0.01% of jobs added between 2012 and 2019, while 70–80 lakh youth join the labour force every year. The real wages of regular workers have declined between 2012 and 2022. Due to high inflation, workers can now afford less than they could ten years ago,” he said.