New Delhi: Indians seem to be living way beyond their means. An extensive survey has found that more and more households seem to be borrowing not for creating assets like building a house or buying a car, but to meet consumption needs ranging from food, transport and medical bills to even repaying loans.
Consumers using credit facilities, probably credit cards, for purchasing fuel and renovating their houses constitute the biggest chunk of the borrowings, a soon-to-be released survey by National Council for Applied Economic Research and Max New York Life Insurance said.
The findings confirm the trend towards urban India’s transformation into a consumerist society with diminished stigma associated with debt. Thus, while housing loan business may be big in terms of value but in terms of number of loans, it is still the odd renovation expenditure or a loan to buy jewellery at the time of a weddings that dominates.
Also, while banks may be pestering you with calls offering a variety of loans, many urban households don’t mind tapping the much-maligned moneylender or friends and relatives to borrow for meeting routine expenses.
Though only 7.2% of urban households borrow from moneylenders, compared to nearly 21% in rural areas, the figure is significant because of the widening institutionalised credit bouquet. Then again, one-third of city borrowers who approach moneylenders do so for meeting routine expenses, the Indian Financial Protection Survey which visited 63,000 households said. In villages the number is a little lower at 25%.
For Indian households, food makes up over half the household budget, followed by transport (10%) and education (7%). Urban households spend 45% of their income on food while the figure for rural households is 55%.
Surprisingly, spending patterns in urban and rural India are more or less similar, with education being the only major point of difference.
Even the spend on durables in rural areas, in what marks good news for white goods companies, has caught up with the pattern in cities. Though 7% of the household spending is on education, only 1.5% of the families have borrowed to finance education. For this purpose, banks, with a share of 19%, are the most important source.
In rural areas, 36% of the households borrowed from friends and relatives to meet education-related expenses.
Source: www.timesofindia.indiatimes.com
