COVID-19: Indian household debt increased by 5% in FY20

Millions of households in India witnessed a decline in their financial assets due to the novel coronavirus disease (COVID-19) pandemic. This led to a sharp increase in household debts in financial year 2020-21, according to a recent SBI report.

In FY 21, the household debt increased to 37.3 per cent of the Gross Domestic Product (GDP) from 32.5 per cent in FY20. The debt consists of retail loans, crop loans and business loans.

These loans are from financial institutions like banks, credit societies, non-banks and housing finance companies.

The household debt to GDP ratio will further increase in FY21. This is due to the rise in health expenditure during the second COVID-19 wave.

But India’s debt-to-GDP ratio is still lower than many other countries. South Korea’s household debt-to-GDP ratio of 103.8 per cent is the highest in the world, followed by that of Britain (90 per cent) and the United States (79.5 per cent).

Mexico has the lowest household debt-to-GDP ratio of 17.4 per cent.