How India Borrows 2024: Sharp Rise In Borrowing; Check Reasons And Trends

Over the past six years, India has seen a rapid surge in borrowing, rising sharply from just one per cent in 2020 to 26 per cent in 2021 and peaking at 53 per cent in 2022 as remote work and online education made technology essential, according to a recent research report on customer borrowing behavior called “How India Borrows 2024,” a study by Home Credit India. “As India undergoes rapid economic transformation, its lower-middle-class customers' financial habits and borrowing patterns have evolved significantly. Over the past six years, data reveals a shift from survival-focused borrowing to one driven by aspirations, entrepreneurship, and long-term investments. This change mirrors broader socio-economic trends in the country, as consumers increasingly strive to enhance their quality of life, empowered by easier access to credit and the rise of digital platforms,” according to the research report. This study covered 17 major cities and 2500 borrowers. 

Here are some key findings from the report: 

Surge In Borrowing For Consumer Durables: There is a sharp increase in the purchase of smartphones and home appliances, rising sharply from just one per cent in 2020 to 26 per cent in 2021, and peaking at 53 per cent in 2022 as remote work and online education made technology essential. This surge highlights a strong demand for digital and home technologies, driven by the growing need for connectivity and convenience in an increasingly digital world. 

Growing Entrepreneurial Aspirations: Borrowing to expand or start a business saw a marked increase, rising from five per cent in 2020 to 28 per cent in 2021, reflecting the economic shift during and post-pandemic as individuals sought new income streams. Individuals who had lost jobs or faced pay cuts sought new income sources. The Indian government’s support for micro, small, and medium enterprises (MSMEs), through credit schemes and subsidies, likely encouraged entrepreneurial activity during this period. Although it dipped to 14 per cent in 2022, it rebounded to 19 per cent and 21 per cent in the subsequent years, showing steady entrepreneurial momentum in this segment. 

Increasing Aspirations For Home Ownership: Borrowing for home renovation and construction showed consistent growth, rising from nine per cent in 2022 to 15 per cent by 2024. This trend reflects a growing desire for improved living conditions, likely fueled by an optimistic economic outlook and increasing aspirations for home ownership. The steady increase in borrowing for these purposes also suggests that people are now more focused on investing in long-term assets. 

Education And Wedding-Related Borrowing: Education loans remained stable at four per cent from 2022 to 2024, indicating a sustained focus on personal development and investment in children’s education. Similarly, borrowing for weddings saw a gradual increase from three per cent in 2021 to five per cent by 2024, highlighting the continued cultural importance of fulfilling social commitments. 

Rising Interest In Personal Transport: Loans for buying cars and two-wheelers, though fluctuating, saw a notable increase from one per cent in 2020 to six per cent in 2024. This rise may be attributed to increased mobility needs, reflecting both economic growth and the desire for independence, in the post-pandemic period. 

Decline In Emergency Borrowing: Medical emergencies, once a significant reason for borrowing (seven per cent in 2020), have seen a steep drop, stabilizing at three per cent in 2023 and 2024. This decrease might suggest better financial planning, more affordable healthcare options, or access to insurance. 

Decreasing Focus On Debt Repayment And Household Needs: In 2020, the world was hit by the Covid-19 pandemic, leading to an unprecedented financial crisis and survival took priority over aspirations. The data highlights this reality, as 63 per cent of lower-middle class consumers borrowed just to sustain their households, struggling with reduced income and job uncertainty in 2020. Moreover, 27 per cent to repay existing loans, underscoring the debt cycle many were trapped in during that year. Repaying previously taken loans and borrowing for household expenses saw a dramatic decline to just three per cent and two per cent in 2024, suggesting improvement in household financial stability. 

Increasing Prevalence Of Online Shopping: Over the past two years, the usage of online shopping has shown a pattern of normalization following the peak disruptions caused by Covid-19. In 2021, during the height of the pandemic, online shopping usage was at 69 per cent, reflecting the increased reliance on digital platforms due to health and safety concerns. However, as restrictions eased and physical stores reopened in 2024, online shopping usage rose to 53 per cent. This modest increase indicates that while the urgency of pandemic-era shopping has subsided, online shopping continues to hold a significant place in customer behavior, adapting to the evolving preferences of today’s shoppers.