When Income Rises but Wealth Doesn’t: How Lifestyle Inflation Is Trapping India’s Youth

India’s booming economy is minting higher incomes, but not necessarily wealth. Behind the gloss of prosperity, a generation is spending faster than it’s earning.

By All India Story | New Delhi | November 12, 2025

India’s youth — nearly 600 million Gen Z and millennials — are fuelling one of the world’s fastest-growing consumer markets. From smartphones to solo travel, global concerts to designer coffee, their lifestyles rival those in developed nations. Yet, paradoxically, their wealth creation remains stagnant.

This widening disconnect between income and asset growth is no accident. Economists call it “lifestyle inflation” or “lifestyle creep” — the phenomenon where spending rises with income, leaving savings and investments unchanged.

And as India’s post-pandemic consumption boom deepens, this quiet crisis is reshaping the country’s financial future.

Post-COVID Spending Boom: From Restraint to Indulgence

When COVID-19 struck, Indian households tightened their wallets. Savings peaked at 22.8% of GDP in FY2021, as lockdowns curtailed travel, dining, and retail therapy.

But once restrictions eased, “revenge spending” took hold. Private consumption rebounded 7.8% above pre-pandemic levels by late 2022, powered largely by young urban earners eager to reclaim lost time.

Millennials and Gen Z drove demand for premium gadgets, e-commerce splurges, travel, and entertainment. The post-pandemic emotional release turned consumption into compensation.

A 2024 consumer behaviour study found that 60% of young Indians prioritized experiences over possessions, while solo travel bookings rose 84%. However, much of this spending was credit-fuelled — financed through EMIs, BNPL (Buy Now, Pay Later) schemes, or personal loans.

What began as a temporary rebound soon became a habit. Each pay hike became an excuse for an upgrade — a bigger phone, a better car, a fancier apartment. The result: rising incomes but flat savings, a pattern economists now identify as India’s lifestyle inflation trap.

Neoliberal Consumerism: How the Economy Trained a Generation to Spend

To understand lifestyle inflation, one must trace it back to India’s post-1991 economic reforms — the era of globalisation, liberalisation, and privatisation.

These reforms ushered in prosperity, competition, and aspirational capitalism. But they also seeded a neoliberal consumer culture where self-worth became tied to spending power.

The rise of financialisation — easy credit, digital lending, and instalment-based consumption — turned affordability into illusion. Even as real wages stagnated, especially in gig and informal economies, consumerism surged.

By 2025, India’s top 10% controls nearly 58% of income, while the median urban millennial faces rising living costs and minimal savings. Despite the glamour of consumption, real wealth inequality has widened.

“We’ve created a generation trained to consume but not invest,” says a senior economist at the Centre for Policy Research. “Neoliberalism promised opportunity, but what it delivered is aspirational debt.”

From global fast fashion to streaming subscriptions and luxury gadgets, social validation through spending has become the new normal. The pressure to “keep up” is reinforced daily by influencers and algorithmic advertising — a digital economy of envy that fuels lifestyle creep.

The GST Reforms: Consumption Boost or Financial Boomerang?

In September 2025, the government introduced major GST reforms aimed at boosting consumption. By cutting tax rates on a range of consumer goods — from electronics to entertainment — policymakers hoped to stimulate demand and support domestic industries.

But the move may have unintentionally deepened lifestyle inflation.

Lower prices effectively raised real disposable incomes, especially among urban earners. Yet instead of saving the surplus, consumers channelled it into discretionary spending — travel, dining, gadgets, and leisure.

“The GST relief is economically stimulative but psychologically addictive,” notes a behavioural economist from Delhi University. “For young consumers already used to instant gratification, cheaper goods act like a trigger for more consumption, not savings.”

As a result, the very reform meant to “unburden the commoner” may end up reinforcing a cycle of short-term pleasure over long-term prudence.

FOMO, YOLO, and the Credit Economy

The cultural lexicon of “FOMO” (Fear of Missing Out) and “YOLO” (You Only Live Once) perfectly encapsulates India’s youth spending ethos.

Financial prudence has given way to experience-based consumption — where happiness is measured by travel reels and unboxing videos, not fixed deposits.

However, this shift is increasingly financed by borrowed money. RBI data shows personal loan disbursements to millennials and Gen Z have risen by over 38% year-on-year, while credit card outstanding balances hit record highs in 2025.

The ease of app-based borrowing — coupled with social validation — has normalised debt among the young. Many see EMIs as a lifestyle tool, not a liability.

“Debt is now aspirational,” says a fintech analyst. “If your friends are buying on credit and travelling abroad, you feel left behind if you don’t.”

Why Income Growth Isn’t Creating Wealth

The paradox is stark: India’s GDP is growing at 6–7%, per capita income is climbing, and youth employment is improving. Yet financial security remains elusive for most young earners.

Three structural factors explain why:

1. Low savings discipline: Rising incomes translate to higher consumption, not higher investment.

2. High credit exposure: EMIs eat into future income streams, curbing wealth accumulation.

3. Weak financial literacy: Only 27% of Indian adults are financially literate, per an OECD study — meaning most don’t understand compounding, risk, or asset diversification.

In short, India’s youth are earning more but saving less, leaving them vulnerable to shocks like job loss, inflation, or medical emergencies.

Fixing Lifestyle Inflation: Policy and Personal Steps

Experts suggest that curbing lifestyle inflation requires both policy reform and personal responsibility.

• Financial education: Schools and colleges must integrate financial literacy, teaching budgeting, saving, and investing early.

• Incentivised saving: Government schemes could offer tax breaks for first-time investors or savers under 35.

• Regulating consumer credit: Stronger oversight of BNPL and personal loan advertising can prevent over-borrowing.

• Mindful consumption: Individuals must redefine success — from “what I buy” to “what I build.”

As one wealth advisor puts it:

“Wealth is not what you earn — it’s what you keep after spending.”

A Generation at the Crossroads

India’s youth-led consumption boom has been crucial to its post-pandemic recovery. But unchecked lifestyle inflation risks turning prosperity into precarity.

The September GST cuts, post-COVID revenge spending, and neoliberal credit culture have together created a system that rewards spending more than saving.

If left unaddressed, India may face a generation of high earners with low assets — a prosperous illusion built on debt.

For sustainable growth, India’s next economic revolution must not only raise incomes — it must teach its citizens how to build, preserve, and grow wealth.