Why Indian households accumulate debt faster than assets

The Hidden Trend Behind Your Wallet

Look, your wallet might be growing, but so is the debt you owe. Between 2019-20 and 2024-25, household financial assets rose by 48%, adding ₹24.1 lakh crore. But liabilities jumped by 102%, totaling ₹15.7 lakh crore. That means the wealth pile is growing, but not as fast as debt. Assets now represent 10.8% of GDP, down from 12%. Liabilities to GDP rose from 3.9% to 4.7%, peaking at 6.2% in 2023-24.

Here's the thing: the big driver is mutual funds. They climbed from 2.6% of total assets in 2019-20 to 13.1% by 2024-25, and new mutual fund investments surged 655% to ₹4.7 lakh crore. At the same time, investments in currency and bank deposits fell, signaling a fundamental shift in how Indians save and grow their money.

The Debt-Chasing vs Wealth-Growth Gap

So, while assets rise, they’re not keeping pace with debt. That 10.8% of GDP in assets versus rising liabilities paints a clear picture: families are borrowing more in hopes of building wealth, but the pace of debt is larger. If borrowing costs stay higher or go up, servicing that debt could squeeze everyday spending, slow down purchases, and alter how families plan for college, housing, or emergencies.

Why does this happen? A shift toward riskier-looking growth avenues helps explain it. Mutual funds are pouring into households’ portfolios, while traditional savings—currency and deposits—dim. People want higher returns, even if the risks rise with them. The result could be more volatile spending cycles for households and more sensitivity to market swings.

The Global Backdrop and India’s Edge

Look, analysts warn that India sits between strong domestic fundamentals and a fragile global stage. Morgan Stanley’s Ridham Desai says India’s growth rests on its own bones—healthy balance sheets, reform agendas, and a huge market—yet global headwinds loom. The world is saddled with record debt and a aging population, which could tilt risk toward fewer, bigger shocks.

Desai flags a long-term challenge: global population decline is a real risk—less immediate than climate change, but threatening. India’s huge population is seen as a competitive moat, attracting global firms chasing consumer markets. Yet the near term isn’t simple. The farm sector remains a big unlock; productivity to reach $2 trillion could turbocharge growth. In a scenario of global aging and debt stress, India could command a larger slice of the world’s growth—perhaps around 20% over the next 15-20 years, if reforms hold and external pressures don’t derail the path.