Nearly three in ten indebted in Kerala, new NSO study finds

While Kerala had an indebtedness of 29.9%, Andhra Pradesh topped the list at 43.7%, followed by Telangana (37.2%), according to the report.

Nationally, indebtedness was 9.3% for first quartile households and 18% for fourth quartile households. (Photo | Express Illustrations)

THIRUVANANTHAPURAM: Kerala ranks third among major states in indebtedness, with nearly three in every ten adults in debt, says a new study published by the National Statistics Office.

While Kerala had an indebtedness of 29.9%, Andhra Pradesh topped the list at 43.7%, followed by Telangana (37.2%), according to the report titled ‘Financial Inclusion and Indebtedness in India: Insights from NSS 78th Round’ authored by Binod Bihari Jena and Rabinarayan Patra. The national average was 14.7%.

Among the major states, the study reported the highest level of financial inclusion in Karnataka (95.9%), followed by Andhra Pradesh (92.3%) and Tamil Nadu (92%). Chhattisgarh stood fourth, at 91.1%, and Kerala fifth, at 91.0%.

Among the six regions of India, the level of financial inclusion and indebtedness was highest in the south, at 92.1% and 31.8% respectively. The least was in the north-east region, at 80.2% and 7.4%.

Good debt or bad debt?

The report said there exists a direct relationship between indebtedness and household economic status and inverse relationship between indebtedness and household size. Nationally, indebtedness was 9.3% for first quartile households and 18% for fourth quartile households.

Among the six regions of India, the level of financial inclusion and indebtedness was highest in the south, at 92.1% and 31.8% respectively. (Photo | Express)

According to C Veeramani, director of the Centre for Development Studies, good debt or bad debt is determined by the purpose for which the loan was taken.

“It is undesirable if the loan is to finance consumption purposes like day-to-day expenses or durables. Conspicuous consumption, like for cars and mobile phones, is on the higher side in Kerala. The rapidly growing digital lending market, easy availability of credit cards and EMI offers could be a reason for the high level of indebtedness,” he said.

On the other hand, capital loans like those for agricultural equipment and educational loans which invest on human capital are considered productive, he pointed out.

According to Veeramani, the survey might have underestimated the actual financial inclusion status of the state due to limited coverage and Kerala deserved a better ranking.