The Indian middle class spends one-third of its income just to pay loan installments!

A new study has found that Indians are spending a third of their income on paying loan instalments.The PwC and Perfios report 'How India spends' analysed the spending behaviour of 30 lakh people, who mainly use fintechs, non-banking finance companies (NBFCs) and other digital platforms.The study participants ranged from tier III cities to metros, with incomes ranging from Rs 20,000 to Rs 1,00,000 per month.According to the report, upper-middle-level earners were the highest among those paying EMIs, while entry-level earners were the lowest. It also found that low-paid people were more likely to borrow from friends, family or local lenders rather than formal sources.The report categorises expenditure into three broad categories - mandatory expenditure (39%), requirements (32%) and discretionary expenditure (29%).According to the report, mandatory spending is defined as spending on loan repayments and premiums for insurance policies, while discretionary spending includes spending on online gaming, eating out or ordering food, entertainment, etc. The requirements include basic household needs such as utilities (water, electricity, gas, etc.), fuel, medicine, groceries, etc."Low-wage earners are spending the majority of their income on meeting essential needs or paying off debt," the report said. In contrast, high-salaried people are spending a larger share of their income on mandatory and discretionary spending. '

The report points out that debt in the higher income bracket is indicative of higher living expenses as well as rising aspirations towards luxury goods and holidays. The report found that discretionary spending increased from 22% to 33% when moving from the entry-level income category to the higher income category. "The same trend has been observed for mandatory expenditures, where the percentage of spending increases from 34% for entry-level income earners to 45% for high-income earners," the report said. However, an opposite trend has been observed for need spending, where the percentage of money spent decreases with an increase in salary - from 44% for those with entry-level incomes to 22% for those with higher incomes. The report found that lifestyle-related purchases accounted for over 62% of discretionary spends, with people in the higher income bracket spending almost three times more on such items (Rs 3,207 per month) than those in the entry-level segment (Rs 958). Online gaming is most popular among low-income earners (22%), which has dropped to 12% for high-income earners.