Amid widening inequality and rapid gross domestic product (GDP) expansion, Indians remain the most optimistic people in the world about their financial prospects for 2026, topping all 30 countries surveyed. New findings from the Ipsos Cost of Living Monitor showed that over half of respondents (51 per cent) expect their standard of living to improve in 2026.
This optimism stands out sharply against a difficult global backdrop. The year 2025 brought a marked economic slowdown, ongoing conflicts in Gaza and Ukraine, tougher trade measures under the Trump administration and repeated job cuts across sectors. Even with these pressures weighing on households and businesses worldwide, Indians remain hopeful of seeing meaningful salary gains and better financial stability in 2026. The contrast between global pessimism and Indian confidence is one of the most striking insights from the data.
In August 2025, US President Donald Trump signed an executive order imposing an additional 25 per cent tariff on imports from India, doubling the total duty rate to 50 per cent, citing New Delhi's continued purchase of Russian oil. India has strongly criticised the move as “unfair, unjustified and unreasonable.” Experts noted that the steep tariffs are a pressure tactic aimed at pushing India into accepting a trade deal on American terms.
India's economy grew by 8.2 per cent in the second quarter (July to September) of the 2025-26 financial year, exceeding expectations and making it the world's fastest-growing major economy. This was driven by strong domestic demand, particularly in manufacturing (up 9.1 per cent) and services, supported by recent tax cuts, pre-festival stocking, and government reforms, with projections suggesting full-year growth well above 7 per cent.
India’s economic trajectory plays a central role in shaping public sentiment. This growth is being propelled by the country’s considerable demographic dividend, namely, a large and expanding base of educated, salaried individuals who are actively participating in and benefiting from economic progress. With a majority of the nation’s population under the age of 35, the youth demographic is playing a defining role, as more opportunities continue to open up in both traditional and emerging sectors of the job market, stated Suresh Ramalingam, CEO, Ipsos India.
However, Ramalingam cautioned that this optimism is not uniform across all sectors. Industries that rely heavily on global demand, particularly certain segments of the services sector, remain vulnerable to shifts in international markets, supply chain challenges, and broader geopolitical disruptions.
Inflation And Cost Of Living In India
On the inflation front, the survey revealed a more cautious and varied landscape. One in two Indians expects inflation to rise in 2026, indicating that concerns around affordability and price pressures remain firmly embedded in public perception. Only 13 per cent believe that inflation has already returned to normal levels, and a small fraction, 8 per cent, expect normalisation within the next three months.
Notably, a larger share, 20 per cent, believe inflation will stabilise within six months, while 22 per cent foresee normalisation over the next year. Another 12 per cent feel that normalisation will take longer, and 25 per cent believe inflation is unlikely to return to normal in the foreseeable future.
India’s retail inflation eased to a record low of 0.25 per cent in October 2025, but economists said the sharp drop is largely statistical and temporary, driven by a favourable base effect, lower food prices and the impact of GST rate rationalisation. They expect prices to edge up again from November as the base effect fades and seasonal food trends reverse. The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) has lowered its inflation estimate for the current financial year (FY26) to 2 per cent.
Notably, the cost of living, according to respondents, is being driven by multiple pressures. Interest rates within the country emerged as the most significant contributor, underscoring the impact of monetary policy on household budgets and borrowing costs. Respondents also attribute rising costs to wage pressures as workers demand higher pay, perceptions of excessive profit-taking by businesses, ongoing strain in the global economy, and continued consequences of the Russia–Ukraine conflict.
National government policies also feature prominently in public perceptions of cost drivers, indicating a heightened sensitivity to policy decisions and economic governance.
The central bank has reduced the repo rate by 25 basis points to 5.25 per cent, marking its first rate cut in three policy reviews as inflation hit historic lows and growth remained robust. Governor Sanjay Malhotra said the Monetary Policy Committee (MPC) has retained its neutral stance even as it moves to support financial conditions.
Households Expect Higher Costs Ahead
In terms of household expectations, nearly half of Indians anticipate an increase in their expenses over the next six months. This includes essential categories such as food and daily shopping, utilities like gas and electricity, and other household necessities. Additionally, many foresee higher costs related to motoring fuel, socializing and going out, subscription services, including OTT platforms and gym memberships, as well as mortgage or rent payments. These expectations suggest that while optimism on income growth is strong, households are also preparing for continued financial pressures, especially on recurring and unavoidable expenses.
When examining the overall financial situation of households, the survey shows that three in four Indians are able to make ends meet. Within this group, 13 per cent report living comfortably, 30 per cent say they are doing all right, and 32 percent indicate they are just about getting by. However, a significant 21 per cent of citizens report difficulty managing their finances, pointing to a segment of the population that remains vulnerable and exposed to economic shifts despite the broad narrative of national optimism.
Responding to an unstarred question in the Rajya Sabha, the Ministry of Finance said the flow of household financial liabilities grew at a compound annual growth rate of 12.9 per cent, rising from Rs 7.7 lakh crore in 2018-19 to Rs 15.7 lakh crore in 2024-25. The data was attributed to the RBI’s latest estimates published in its August 2025 bulletin.
Household liabilities remained in the range of Rs 7.4 to 9 lakh crore between 2018-19 and 2021-22, accounting for between 3.7 and 4.1 per cent of GDP. The sharp escalation began in 2022-23, when liabilities shot up to Rs 16 lakh crore, rising further to Rs 18.8 lakh crore in 2023-24. The government attributed the surge to a steep increase in borrowings from financial institutions, particularly for mortgages and vehicle loans.
The government also said rural and urban households both recorded increases in liabilities, although the released data does not provide a disaggregated breakdown. The rise, it said, must be viewed against the broader macroeconomic context of income disruptions, inflationary pressures and the increased cost of essential services during the pandemic period.
Officials said the debt-to-GDP ratio for households peaked at 6.2 per cent in 2023-24, before falling to 4.7 per cent in 2024-25. The decline, they said, indicates “early signs of deleveraging” as interest rates ease and liquidity conditions improve.
The government attributed the post-2023 moderation to several recent policy measures. The RBI increased risk weights on specific categories of consumer credit and bank lending to Non-Banking Financial Companies (NBFCs) in November 2023 to reduce credit-related vulnerabilities. This prudential step was aimed at cooling down unsecured lending, which had been rising faster than other forms of retail credit. |
