Here is a very good read on the Indian market from Forbes India. The market is quickly modernizing, though with 17% of the world’s population and generally limited credit infrastructure, there will be some growing pains as the market matures. We covered India, along with Brazil, Russia and China in a review of the BRIC markets late last year.
Imagine the potential:
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Leverage among ordinary Indians is doubling every three years and stands at $82 billion currently
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The numbers are staggering. Unsecured finance, which includes personal loans and credit card debt, amounted to ₹576,600 crore or $82 billion at the end of FY18, according to data from the Reserve Bank of India.
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To put that number in perspective, it’s almost double the inflows of foreign direct investment ($44.86 billion) in fiscal 2018.
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While a part of the $82 billion includes loans by small businessmen to finance the working capital needs of their business, the overwhelming majority goes into financing everyday consumption items.
One way to look at the growth is in tradelines from credit bureaus. According to this article, there were 821 million consumer tradelines in 2017 (June). In 2018 for the same period, the number grew to 947 million. This is against a consumer base of 404 million records in 2017 and 443 million in 2018.
Compounded Annual Growth Rates (CAGR) would satisfy any banker, with 20.74% over 5 years. But, some bad news:
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Already one direct consequence of this shift has been a decline in savings rate from 31.25 percent to 29.98 percent in the last year.
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“Declining savings and rising consumer leverage could become a source of concern as so far the biggest source funding the India story has been the household,” says Dr Sachchidanand Shukla, chief economist at the Mahindra Group.
Card models vary from markets based on interest and payment terms, but for now, the fledgling retail banking business is in a growth model. With population almost four times the U.S. market, there is plenty of room for development as the process matures.
For a broader view of the BRIC market, try this recent Mercator report.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group
