
Watch Out: India’s Aadhar And The Consumer Credit Tsunami - npguy
http://statspotting.com/2012/12/indias-aadhar-and-the-consumer-credit-tsunami/
======
realrocker
The concerned regulatory bodies in India are staffed with people from a
different middle class. A class where living simply and being debt free are
the basic tenets of life. This class is from small towns and villages of India
who view a Government job as a King's prize. India has such a low credit card
ratio due to the large number of regulations .It is a cultural thing, yes, but
the rules are created by a different set of people for another. Also, Credit
Card implies independence and privacy. If you need a loan in India, almost
always, parents will come through. Most MNC Credit Houses don't get that India
already has a Credit source for small amounts of money in the form of
entrenched family system. Home loans and Car loans on the other hand are a
different story. And since, Credit Cards are primarily used for low spending,
I don't see them growing exponentially for at-least two generations(i.e about
50-60 years). That's how long I think the family system is going to survive.

~~~
npguy
Very important points - all of them very valid. Except maybe this: " I don't
see them growing exponentially for at-least two generations(i.e about 50-60
years)" - I would say, there are so many variables that decide this. For
example, taking huge housing loans was something unimaginable few years back
in India. I guess my point is this: if we think it will take 60 years, it will
probably take 6. or less than that.

~~~
realrocker
Let me explain that more. Based on some
projections([http://articles.economictimes.indiatimes.com/2011-11-12/news...](http://articles.economictimes.indiatimes.com/2011-11-12/news/30391268_1_largest-
economy-demographic-dividend-indian-economy)) India will have spending power
matching present best. My hypothesis is that as there is more liquidity to go
around, families won't need the economic pressure to stay nuclear close. This
would lead to break down in credit discipline and thus allowing the emergence
of credit cards. Right now and for two generations this does not feasible(i.e
by and after 2050). Well, based on one of the many variables atleast, though a
major variable.

~~~
realrocker
So in my opinion, if someone does want to track some finance stats in India,
they should primarily target for Life Insurances, Mutual funds and other
savings instruments. There is also an impending FDI(Foreign Direct Investment)
in Life Insurance. That thing is ready to explode in the next 3-5 years.

------
anovikov
Why do you think credit cards are a good thing? They are neither especially
popular here in Europe where people are educated and have money. I am 33,
M.S., mid-six figures income, and never had one and don't want it. And never
took any other kind of debt, either. I know a lot of people like me. I think
Indians are good at their frugality and correctly understand that using a
credit card is 'spending money they don't have'.

~~~
roel_v
How do you buy stuff online?

~~~
anovikov
Using debit cards. Ah wait, my Visa is technically a credit card with a 0
credit limit. So in a way, i have one. But i rarely use it, most time i make
do with Visa Electron debit cards.

------
fareesh
As a 27-year-old member of the Indian middle class, I tend to side more with
the notion that credit cards are a less sensible alternative for general
spending, for all the reasons already discussed here. This is a fairly popular
opinion among most of my peers, but not because of the cultural stigma
mentioned in the article, but a general sense of frugality, as another comment
mentions.

~~~
npguy
That approach might not be good for the economy overall though. India will
become a spending driven society, like the US. In which case, credit will play
a big role. It is just inevitable.

~~~
fareesh
Whether or not it is, I don't think the average middle class consumer is going
to be concerned with anything but their own financial well-being, over other
relatively macro-economic considerations and consequences.

~~~
npguy
you are underestimating the power of the government and central bank.

if they decide that they want to move the country in a given direction, they
have all the tools to make it happen. Just look at the way US home buyers got
immediate tax credit as an example of how this could play out.

------
rikacomet
It seems people here are forgetting that in the case of Aadhaar, the real
reason for it is the official one, which is in short term, it is to track that
the 40,000 crore (7.2 Billion$) subsidy given to the poor people of the
country should reach the right people, right now, the paper and pen system has
lot of room of corruption seeking in, and infact thats true, that a lot of the
subsidy bill, doesn't arrives in a timely manner to its correct beneficiaries.
When the record system would be digitalised, and centralized, it won't be that
easy to tamper with the records as it is right now.

Additionally, in long term, it will allow the govt to track the implementation
of its various policies more precisely.

In short it is what the SOCIAL SECURITY NUMBER is to the western civilization.

------
chandru89new
How unfortunate that 'spending money you don't have' is considered backward.
It kind of irked me because the piece isn't sensible. It's a cultural thing
that Indian middle-class tends to be disciplined about expenses. And it's a
good thing actually.

But like it's said, some men want to watch the world burn. Like how families
in the US had to do double jobs to get rid of debt, the global consciousness
wants Indians to suffer the same fate. Great.

~~~
npguy
I replied to your comment on the original post:

'Thanks for the comment. Obviously, the use of the word “problem” sends out a
message that somehow we think credit is good for India. Thanks for pointing
that out – we have tried to fix that in the article, and hopefully as a
result, the messaging changes as well.

The intended messaging was this: the sheer scale of credit that would
originate from India in the next 3-4 years cannot be ignored.'

~~~
chandru89new
Fair enough :) Sorry the reply here is late. I just logged in to check my
profile.

------
redwood
I'm not a big fan of these PR fluff pieces companies put out about their
supposed future potential on HN... This coupled with the marketing advice
blogs that mention doing precisely _this_ on HN makes the whole exercise
harder to take seriously. Sure: there will probably be money in India's
consumer credit. Will this be the company to do it? Maybe. But getting there's
the hard part....

------
nacker
The disturbing thing about this piece is that it seems to imply that a tsunami
of credit cards will be a positive thing for India.

How anyone can think this in view of the global debt crisis is puzzling. The
smarter fraction of the population in the first world now tends to regard
credit cards as akin to crack, opium, or junk food. Things the moderate use of
which calls for unusual levels of self-discipline.

I'm sure the prospect of millions of new credit card slaves in India has its
Shylocks salivating, but let's hope something has been learned about the
consequences of failing to keep them under close scrutiny.

~~~
pessimist
Access to credit is a huge deal for people. How else to create a small
business, tide over a health crisis, or make a big education investment?

Right now poor people are at the mercy of pawnbrokers, loan sharks who often
charge interest rates of 100%+ per year.

Potentially access to reasonable rate credit cards is life-changing.

~~~
nacker
If you can't think of any way to create a small business other than by using a
credit card, you probably shouldn't be starting a business.

Making a "big education investment" on a credit card is insanity. The student
loan debt crisis may well be the next domino to fall in the the US economic
meltdown - it was half the motivation for the participants in Occupy:

[http://business.time.com/2012/11/29/is-the-student-loan-
debt...](http://business.time.com/2012/11/29/is-the-student-loan-debt-crisis-
worse-than-we-thought/)

Rates on credit cards are generally _less_ than reasonable, and their policies
are frequently abusive. And this is in America, not the "wild East".

[http://www.mybudget360.com/endgame-credit-card-
nation-40-yea...](http://www.mybudget360.com/endgame-credit-card-
nation-40-year-credit-card-bull-market-over/)

Watch, or listen to this, if you are concerned about India's future
exploitation:

[http://www.democracynow.org/2010/2/23/robert_manning_credit_...](http://www.democracynow.org/2010/2/23/robert_manning_credit_card_nation_the)

