Finance Minister Nirmala Sitharaman on Tuesday dismissed concerns over rising household debt, asserting that India’s financial position remains stronger than many emerging market economies (EMEs) and some of the developed nations.Speaking in Rajya Sabha, she addressed debates questioning the government’s economic policies and their impact on household liabilities.
“There is a lot of debate on household debt increasing, with questions on whether policies are working. However, India’s household debt is comparatively lower than many emerging economies and some developed nations,” she said.
India’s household loans and debt securities stand at 39% of the country’s GDP. This is higher than Brazil’s 35% but far below Malaysia’s 69% and the ratios seen in Canada, Hong Kong, Israel, Australia, and France.Household assets and liabilities growSitharaman noted that while the stock of household financial liabilities as a percentage of GDP rose from 38% in March 2023 to 40.2% in March 2024, household financial assets also increased significantly, from 103.5% to 108.3% in the same period, as per RBI data.Also read: FM Sitharaman launches app for PM Internship Scheme“India’s asset and liability figures are very much better than many of our comparable emerging markets and even some developed economies,” she said, countering concerns over unsustainable debt burdens.Workforce and wage growthThe minister attributed some economic shifts to the long-term effects of COVID-19, which have reshaped employment trends.“One of the long-term effects of COVID has changed the nature of work. Many have chosen to work from home or avoid full-time employment. At the same time, industries are adapting to robotics and Web3-driven production, leading to significant churn,” she said.On compensation growth, Sitharaman refuted the notion that employee wages have stagnated, citing an 11.1% compound annual growth rate (CAGR) in employee compensation between FY15 and FY23, inclusive of the COVID years.Consumption inequalityShe also dismissed concerns over widening income inequality, stating that urban and rural consumption inequality has declined significantly.“There has been a drastic improvement in the index. Inequality is not widening—it is only narrowing,” Sitharaman said.The FM’s remarks come amid ongoing debates over India’s debt levels, economic growth trajectory, and post-pandemic employment shifts, with the government maintaining that India’s economic fundamentals remain strong.Also read: We’re very close to finalising GST rate reductions: FM Nirmala Sitharaman
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