VMPL
New Delhi [India], November 14: India stands at a defining economic moment. As the country advances toward becoming one of the world’s largest consumption-driven economies, the patterns of household spending, saving, and investing are undergoing a major structural shift. Rising incomes, rapid urbanisation, and the aspirations of a young demographic are powering unprecedented consumption growth. Yet, beneath this confidence lies a critical challenge–the steady decline in India’s household savings rate.
According to economist and financial strategist Dr. Akshay Kulkarni, this imbalance between rising consumption and weakening savings is one of the most important macroeconomic issues India must address over the next decade.
A New Consumption Era Is Taking Shape
India’s per capita income crossed $2,600 in FY25 and is projected to reach $5,000 by 2030, signalling an economy firmly moving up the prosperity curve. This rise in income has fueled a nationwide shift toward premiumisation–where spending increasingly flows towards higher-value goods, services, and experiences.
Growth is visible across categories such as personal care, electronics, travel, health, fitness, and leisure. The 18-25 age group, in particular, is driving experience-led consumption. Supporting this trend is the IMF’s projection of 6.6% GDP growth in 2026, increasing household confidence and purchasing power.
By 2027-2030, India is expected to host 400-450 million middle-income consumers, pushing the consumption economy toward $5 trillion by 2031.
The Savings Paradox: Rising Spending, Falling Financial Cushion
But India’s consumption boom has another side.
Household financial savings, which once stood at 7.3% of GDP, have fallen to 5.3% post-COVID. Rising household debt, digital consumption habits, and lifestyle expansion have weakened long-term savings discipline.
Dr. Kulkarni highlights that this trend is concerning because savings form the backbone of domestic capital formation. Without a strong savings base, India risks becoming more dependent on foreign inflows to finance growth–making the economy vulnerable to global volatility.
Why Strengthening Savings Matters for GDP Growth
Higher household savings feed directly into:
* Greater Gross Capital Formation
* Long-term domestic liquidity
* Infrastructure and manufacturing investment
* Stronger financial markets
* Reduced external dependency
Dr. Kulkarni notes that even a 1% rise in the savings rate can generate ₹2.5-3 lakh crore annually, strengthening India’s economic engine.
States like Maharashtra–with a per capita income of ₹3,09,340, above the national average–are ideal grounds to pilot new savings-driven initiatives that could later scale across India.
A Policy Pathway: New Frameworks to Rebuild Discipline
Based on his research and experience, Dr. Kulkarni suggests a multi-layer strategy:
1. Source-Based Savings Mechanisms
Automatic deductions create behavioural discipline and reduce reliance on voluntary savings. Countries with such frameworks consistently show stronger household stability.
2. A State-Backed Savings Growth Scheme
Maharashtra could collaborate with Asset Management Companies (AMCs) to float a dedicated, risk-mitigated savings scheme.
Such a programme would:
* Encourage long-term systematic investments
* Protect first-time investors from market volatility
* Channel domestic savings into productive assets
3. Capital Market-Linked Wealth Creation
Equity-linked instruments, when used responsibly, offer higher inflation-adjusted returns than traditional schemes like post office deposits or provident funds.
Dr. Kulkarni emphasizes that long-term investing, not timing the market, drives wealth creation.
4. Women-Centric Investment Choices
Empowering women to choose investment amounts and asset classes can break long-standing gender barriers in household finance. This significantly expands India’s formal investor base.
FIRE Philosophy: A Framework for the New India
As a strong advocate of the FIRE (Financial Independence, Retire Early) philosophy, Dr. Kulkarni believes that structured savings and disciplined investing are essential–not to retire early, but to build freedom from financial stress.
In an economy where discretionary spending is rising faster than income, FIRE principles provide the guardrails households need to balance today’s aspirations with tomorrow’s security.
A New Economic Balance for a New India
India’s economic narrative is evolving rapidly. From premiumisation to digital consumption and rising aspirations, the country is entering a growth phase unlike any before. But to sustain this momentum, household savings must regain their central role.
Dr. Akshay Kulkarni’s analysis makes one thing clear:
India’s next leap will not come from consumption alone–but from the strength of its savings, investments, and financial discipline.
As India marches toward a $5 trillion consumption economy, the balance between spending today and securing tomorrow will define the nation’s long-term stability and prosperity.
For collaborations and financial guidance:
* akshayvijaykulkarni@gmail.com
* LinkedIn — Dr. Akshay Kulkarni
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