By Krishna Jha
There is the severe fall in growing household savings that can be measured in the observation that says that at least 95 percent cannot save any money. At the best the ratio stands at Rs 5 out of a hundred. The crisis has come down to worst in five decades. Silent and severe, the fall in household saving rates have been identified at 5.1 percent, the lowest level in last 47 years. The crisis in savings continues to deepen while the loans are soaring. It could be compared with previous generations in 1970s, 80s, and even 90s when savings were part of income.
The debts have gone up to unimaginable heights and spent in clothes, cars and other luxuries. Consumption is rising much higher than income and hence, debt. Total household debt has grown to Rs 120 lakh crore, a figure unimaginable a decade ago. But what’s more worrying is where this debt is going. Earlier, families borrowed mainly to buy long-term assets like homes or gold. Today, loans are used for cars, phones, clothing, groceries—even vacations. Consumption is rising faster than income, and the gap is being filled by credit.
One crisis leads to the other. There is the pressure of credit card, almost explosive. It stands now at Rs 3 lakh crore, and 28 percent of users are defaulting. Then follows the mental stress while average credit balance Rs 33,000 and the national average salary around Rs 25,000. At least 19 percent of suicides are due money issues.
The crisis becomes even more intense in face of the unrestrained fall in the value of Indian rupee in the international market. In the year of January-December, 2025, there has been a sharp depreciation of 4.3 per cent against the US Dollar (USD). The forex analysts have cautioned that Indian Rupee (INR) has become the worst performing currency in Asia and now if the trade deal with the US does not take place soon, it may further slide to 90 per USD. In fact, more than domestic fundamentals, the rupee’s trajectory now hinges on global dollar strength. Now for many months, the INR has been facing depreciation pressure, though not so much because of the current account that has been benign, but because of capital outflows. Indian rupee has come down against Asia FX (foreign Exchange), but mostly against current account surplus countries.
The INR has weakened at the rate of four percent calendar year-to-date, as against 2.9 percent more than the domestic fundamentals in IDR (Indonesian Rupiah) and 1.3 in PHP (Philippine Peso). In addition, the rest of the Asian currency complex has appreciated, largely driven by the CNY (Chinese Yuan) where the PBOC/SAFE (Currency Exchange policy of China’s central bank) have been driving this through repeated intervention and signalling. The INR has touched a new low compared to the USD on November 21, 2025, as it went past the 88.8 levels (that the RBI had been defending in recent weeks) and touched 89.66 levels in the spot market. Since then, it has recouped some of its losses and was on trading at 89.22 levels against USD.
As the financial observers have noted, the 3.6 percent appreciation of the USD over the last two months has put pressure on most currencies, including the INR. India is facing twin external shocks: U.S. tariffs and high precious metal prices. The combination of adverse geoeconomic and geopolitical environments is weighing upon India’s merchandise trade deficit. The fall or the sharp depreciation in the INR is the consequence of the cumulative impact of several factors. First and foremost, the US administration has imposed 50 per cent tariff on India that has been hurting our exports leading to a record 41.7 billion dollar trade deficit in October triggering a rupee slide.
There has also been a sharp hike in gold price this year that has triggered huge investment in gold and Gold ETFs leading to more than domestic fundamentals increase in demand for gold in October causing the gold import bill to spike to 14.72 billion dollar in October. In fact there was significant contribution from the depreciation of sustained FII selling in the stock market to rupee depreciation through capital outflows. Delay in the expected trade deal between India and the US has also made an impact. Rupee might bounce back on condition if trade takes a favourable turn. But there has been caution also in this grim situation. Depreciation has set at the rate of 90 to one dollar.
The combined impact of weakness in exports and rising imports has resulted in a record high merchandise trade deficit of 41.7 billion dollar in October 2025, as such, there is now a strong likelihood that India’s current account deficit widens to 1.2 percent of GDP in financial year of 2026 from 0.6 percent in financial year of 2025.
The inflow in the foreign investment also remains subdued on account of tariff uncertainty and AI-driven market movement in the US. After net FDI clocked 5.7 billion dollar of inflow in first quarter of the financial year ‘26, the momentum slowed to 1.9 billion dollar in second quarter of financial year ’26. For India, the tariff impact intensified because of a wider trade deficit and consistent portfolio outflows in recent weeks as global funds turned risk-averse.
Nor are the signs of the condition of Indian economy encouraging. In its annual review, the International Monetary Fund has given India’s GDP data C grade. This means the IMF does not consider India’s economic data reliable. The IMF giving India C grade mans that there are shortcomings in the available numbers because of which it is difficult to form an accurate picture of the Indian economy. (IPA Service)
