The International Energy Agency (IEA) has warned that the boom in consumption of auto fuels in India, particularly petrol and aviation turbine fuel (ATF), is largely debt-fuelled, and raised concerns that rising household debt may impact the usage trend.

The IEA, in its latest report, projected that India’s expected 1 million barrels per day (mb/d) increase in oil demand growth is the largest for any single country over 2024-2030. This growth will be led by petrol and jet fuel, which is due to a rising middle class, coupled with aspirational spending.

“A risk to our outlook is that the consumption boom driving demand for India’s transport fuels is to a large extent debt-fuelled. Borrowing has become increasingly commonplace among India’s middle class. Household debt rose to 43 per cent of GDP in 2024, up from 35 per cent in 2022, and a possible credit spiral could derail expansion,” it added.

Household debt

Recently, the Reserve Bank of India (RBI) said that even as household debt is rising, the increase is driven by a growing number of borrowers rather than an increase in average indebtedness.

The stock of household financial liabilities, including personal loans and credit card debt, amounts to ₹120.96 lakh crore as of March 2024.

The central bank, in its Financial Stability Report (December 2024), said at 42.9 per cent of GDP (at current market prices) in June 2024, India’s household debt is relatively low compared to other EMEs; however, it has increased over the past three years.

Borrowing by individuals in the household sector constituted around 91 per cent of the stock of household financial liabilities as at end- March 2024, RBI added.

“Disaggregated analysis of the nature of individuals’ borrowings shows that loans are primarily used for consumption (personal loans, credit cards, consumer durable loans and other personal loans), asset creation (mortgage loans and vehicle loans and two-wheeler loans) and for productive purposes (agriculture loans, business loans and education loans),” it pointed out.

As per Ministry of Statistics and Programme Implementation (February 28, 2025), the compound average growth rate (CAGR) between FY20 and FY24 in household gross disposable income and private final consumption expenditure (at current prices) is 10.1 per cent and 10.3 per cent, respectively.

POL consumption

An expanding middle class, coupled with growing affluence, is pushing up consumption of petrol and jet fuel, the two commodities in the auto fuel segment, which will help the top crude oil importer lead global oil demand growth.

The demand for the two auto fuels, which points to the evolving dynamics in the personal mobility and aspirational air travel segments, is aided by an expanding economy and commercial base, besides rising household energy consumption.

Moreover, while all key products will contribute to the expansion, transport fuels will lead the gains – a global anomaly, IEA said.

In relative terms, jet/ kerosene will rise the fastest, at almost 6 per cent annually. The fuel, starting from a low base, stands to benefit the most from population growth of 5 per cent between 2025 and 2030 and its rapidly expanding middle class keen to spend on luxury goods and services, including foreign travel, it added.

A similar dynamic propels annual gasoline demand growth of 4 per cent, which has significant scope for expansion given low levels of car ownership.

“Our models assume a 40 per cent increase in the size of the car fleet by 2030 – a rate of expansion that comfortably outstrips the impact of efficiencies and EVs, with growth in the latter category mainly in two- and three-wheelers,” it added.

The report noted that India’s GDP growth will average at 6.4 per cent over the forecast period — the highest by far for any major economy.

Improved infrastructure will help to boost mobility and car ownership. Oil demand will grow at a relatively fast rate as changing spending patterns, urbanisation and industrialisation makes India’s economy more energy intensive, IEA noted.

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Published on June 24, 2025