Consumer spending is the backbone of any economy. When consumers spend money on various goods and services and make large one-time purchases, it not only helps increase economic growth but also reflects current economic trends. This is because many factors influence consumer purchases, including consumer sentiment, the job market, household purchasing capacity, inflation, housing prices, the stock market, and more.
Indian consumers are becoming more aspirational, and that’s where the problem starts. The results of the Household Consumer Expenditure Survey in India, conducted between August 2022 and July 2023, indicate a change in consumer behavior among Indian households over the last two decades. The proportion of consumer spending on traditional products (such as food, beverages, and clothing) has fallen in the past ten years while spending on luxury and aspirational products and services (such as travel and entertainment) has significantly increased. This trend is expected to accelerate. As India moves toward becoming the third-largest economy by GDP, the consumer market is also predicted to become the world’s third-largest by around 2030.
This shift in aspirations is leading to severe issues for a society which follows the western culture of consumerism and we have become more materialistic than ever. The mindset in Indian society has changed with citizens of are already in a rat race to acquire more material wealth. People have started believing that if you are not materially well-off, then you are not successful in life. Comparisons have started among different sections of the middle class: who has a better car, who has a better house, who has a foreign vacation. If all these things are not present in a household, people are considered failures in life. With banks opening their doors to the salaried middle class in the form of unsecured loans and credit cards, salaried people do not mind taking on high leverage to purchase material goods to show that they are also successful.
Household debt in India has reached a record high of around 40 percent of GDP. Consumption with the help of debt is a significant problem, if not curtailed can lead to social unrest in Indian society. People are taking on more debt to pay past debts and are in a form of debt trap, leading to a debt bubble that will burst in the future. Even sovereign debts are hard to manage, and we have seen countries like Sri Lanka and Argentina in trouble with their sovereign debts. If countries find it hard to manage their sovereign debts, imagine the plight of a traditional household in India.
What is the Solution?
The government must inculcate behavioral change among the citizens and make minimalism a national-level policy. The concept of minimalism is the only way out of this issue. Otherwise, materialism has no end and will keep increasing as we progress further. Different religious philosophies can help people understand that material well-being brings only momentary happiness. As people get used to their current material possessions, they will look for more, and this process will continue. Steering people towards spirituality is another way to curtail debt-led consumer spending because spirituality teaches people to look inward and discourages excessive material consumption.
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