Conspicuous Consumption and Borrowing Dynamics in Indian Households: Understanding Household Behaviour

This study investigates the relationship between conspicuous consumption and different forms of borrowing and equated monthly instalments (EMIs) in Indian households, using panel data regression models and Heckman two‐step selection models. Across various measurement approaches, a consistently positive and significant relationship is observed between conspicuous consumption and household borrowing for general purposes, weddings, consumption, vehicles and consumer durables. Higher levels of conspicuous consumption are also associated with increased loan payments across different categories of EMIs. During the COVID‐19 pandemic, the impact of conspicuous consumption on the likelihood of borrowing in Indian households reversed, yet post‐pandemic, borrowing behaviours returned to pre‐pandemic patterns, emphasising the persistent influence of conspicuous consumption on household borrowing. These findings highlight the potential financial strain and risks faced by Indian households engaging in conspicuous consumption due to increased borrowing and higher EMIs.