Consumption and loans:

Loans and economy:

Debt and slowdown:

NEW DELHI: One of the biggest factors behind the economic growth falling to a six-year low is the sharp deceleration in private consumption , which had been one of the biggest drivers of growth (government spending, investment and exports are the other three) over the past few years.Private consumption grew just 3.1% (year-on-year) from April to June, down from 7% in the previous quarter (on a quarter-on-quarter basis, it contracted 6.7%).Some economists say that the slowdown in private consumption is the result of consumers earning less (as income growth has been stagnant) and spending more on borrowed money (as access to credit has become easier) in the last couple of years.While home loans have more than doubled since 2011-12, unsecured lending (like credit card debt or personal loans) has more than trebled. With wage growth remaining low, job opportunities shrinking and job losses spreading, consumers are now cutting down on consumption and manufacturing has taken a hit.The debt burden has had an impact on our financial savings too. Over the years, while the gross financial savings of Indian households have been in the range of 9-10% of GDP, the net financial savings have fallen from 7.2% of GDP in 2011-12 to 6.5% in 2017-18. Overall household savings have fallen from 23% of GDP in 2012 to 17% this year.Meanwhile, household indebtedness has gone up from 9% in 2012 to 11% of GDP now. The money that you save adds up to the fund that's available to the industry and government for investments and to fuel economic growth. So, a fall in household savings hurts the economy.While the level of debt may not be too high now (Rs 16,945 per person with an annual per-capita income of Rs 1.42 lakh), a slowing economy can make it a burden. If job losses spread (unemployment has risen to a 45-year high) and people's income fails to increase, they will try and build up precautionary savings and cut down on consumption further.