Personal credit offtake up 4 times since 2000

The credit economy is on a roll. The personal credit outstanding in the country climbed four times to Rs 1,60,000 crore in 2003 from Rs 35,000-40,000 crore in 2000, according to KSA Technopak Chairman Arvind Singhal.

This amounts to 12-14 per cent of the total consumer earnings of Rs 12,00,000-13,00,000 crore in a year. "This is healthy to some extent. But it is still short of those in developed markets. In the UK, for instance, the personal credit outstanding is 1.1 times the total consumer earnings," Singhal said at the KSA Technopak Retail Summit, which began here yesterday.

The higher spending is reflected in another set of statistics: while per capita income grew 4-5 per cent per annum in the past five years, per capita expenditure in the country increased much faster at 10-12 per cent per annum.

Singhal said the spectacular rise in personal credit was because of a large number of urban households having multiple income. "In the top 7-8 cities, almost 7,00,000 jobs have been created in the past 4-5 years for young people who stay with their families and work within 5-10 km of their homes. The incremental income in most of these households was for discretionary spending," he pointed out.

The changing demographics of the country in favour of the young also had a role to play, Singhal said. About 50 per cent of India's population, or roughly 500 million people, are below 20. "People below 35 make up 65 per cent of the population. Six out of ten households in the country have children born after 1985, when India started liberalising. The decision-making is moving towards these people," he added.

Bankers have been attributing the rise in personal credit offtake to the fall in interest rates in the past few years and an improved consumer finance network.

Marketing consultant Rama Bijapurkar said Indians had taken to personal credit in a manner that showed aversion to risk-taking.

What's spurring the credit economy

---

• Decision-making shifting towards the young as people below 35 make up 65% of the population
• In India, personal credit outstanding has grown to 12-14% of the total consumer earnings. In the UK, however, it is 1.1 times