Why we are BUYING MORE & MORE on CREDIT (India's CREDIT addiction) | Akshat Shrivastava

hi everyone so on Amazon right now there is great Indian festival that is going on and if you try to buy any product almost any product what you will see is that there is a no cost Emi option which is available in order to buy that product now most of the people think that you know what this is like an interest free loan there is 0% interest on this so if I just have to buy like a TV fridge AC phone this that Emi form I'll keep on repaying it but I'm getting this loan to buy this particular product at absolutely 0% interest rate 0 % interest R so we end up buying more and more and more in fact as per an RBI study this was published somewhere in 2013 so RBI has itself said that the interest element is often camouflaged and passed on to the customer in the form of processing fees and from 2013 to 2023 people are still assuming that they are getting 0% interest rate they are buying more and more and more this that so the Americanization of Indian economy has started to happen in fact it is very well underway this is a very very powerful Trend which can either make you very very rich or it can actually end up bankrupting you in the next 10 15 years please listen to this video very carefully I will break down every single thing that you need to know you just need to watch this video if you like it do 100% press the like button these type of videos need to reach out to more people consumer finance companies and a bunch of other big big players I'm going to show you all the fact and data so with that said let me first and foremost present some really interesting key developments that are happening in India fact number one is that when it comes to savings rate in India right now we are at a five decade low savings means savings to GDP ratio for example our parents grandparents used to make less money but the percentage of their salary that they used to save was much higher compared to now that most people are earning more but the amount of money or percentage age of salary that they are saving is very low right so this is a very worrying Trend this is fact number one fact number two early stage jobs have started to pay less less and less so here is the CEO salary versus fresher salary at IT jobs and one of the biggest churners of wealth or creators of wealth in the last 20 years have been what it companies right Bangalore grow hyab grow why because of the IT job growth now the situation is such recently announcement was made that infosis is going to do less and less hiring so to say campus so lot of problems Brewing up the job situation in India especially for the middle class upper middle class is really really bad in fact situation has become so worse now people are thinking yeah what's the point of doing engineering is say better I'll just go and you know become a rider on zomato or swiggy and all this stuff I'll probably make more money it's not probably the chances are that there's very very high likelihood that you are going to make more money doing these type of jobs fact number three you will see people people around you kids around you buying iPhone that lak lak one one lakh one and a half lakh rupe iPhone kids are buying right college going students school students are buying iPhones it's not as if that their standard of living is very high or their parents are making crazy amount of money why are they buying it because Emi option 0% rate interest rate P we are able to borrow money hypothetically so we will go and buy more and more and more this is one of the arguments that kids are making to their parents s and 0% interest rate pay so it's fine right for my next three birthdays don't buy me anything but please let me buy an iPhone because it is 0% interest rate that you will have to pay and kids are using these arguments you let me know if this is true or not fourth and the most important fact is that we keep on talking about GDP by GDP $3 trillion 5 trillion 7 trillion this trillion that trillion have you ever bothered about checking what the GDP per capita which is a more relevant number is in case of India out of roughly 200 countries we are right now ranked somewhere around 120th we fall below something like Namibia something like Iraq which are waron countries and all that stuff countri our GDP per capita is that is the situation of an average person in India right now earlier we used to be sensible in terms of the way we used to spend money we used to care about the amount of debt that we used to have but right now the situation is such just because we are getting like 0% interest hypothetically 0% interest we'll keep on Buy buying it this that so this is leading to Americanization of the Indian economy just to quote couple of facts from America number one their household debt is in trillions of dollar an average American holds on an average four credit cards an average household debt in America is more than 80 82 lakh rupees which comes out to be somewhere around $100,000 it Z so much they are indebted do you want to live such a life right so therefore I always keep on telling my student keep on telling the viewers of my channel that please be sensible in terms of where you are spending money I investing my money in a lot of stocks lot of companies which will make me more money given this Americanization of Indian economy Trend so let's have that discussion and one key point that you need to remember is that in order to better your credit history it is critical that you don't fall in that debt trap and in order to do that you first need to understand what your credit score is which brings us to the partners of today's video which is one score it is an excellent educational app which you can use in order to check your credit score once you get an assessment of what your credit score is then you can intelligently take debt that is the most central point that you must remember they provide civil and Experian Credit Bureau reports every month for free of cost there is ad free spamf free credit monitoring that can happen through this app by using that feature you can get a better understanding why your credit score is changing all your accounts loan and credit cards are in one place there is single dashboard to monitor all credit accounts you can you can set a reminder payment history limit utilization and Avail other features you can report to respective bureau if you find any fraudulent loan or entry under your name there are also interactive quizzes Which will make you more aware of this entire topic so definitely go and check out the links in the description and comment box and read more about the app it can definitely make you more financial aware it is available both on Apple Store and Google Play okay so now let me systematically answer three Central questions one is that why are people in India taking and buying everything on on credit second what are Regulators doing about it and why are they letting credit card companies get rich third and most importantly that how you can use this practical case study to make money very few videos will be there on the internet that will actually analyze a case study and we'll talk about how you can make money from it so I will disclose my plan personally if you watch the entire video you'll understand all these key Concepts would highly encourage you to number one press the like button and share it with your friends so okay let's go one by one number one why is credit uptake so high in India why are people doing all this okay so the short answer there is that there are three Central reasons why people are buying things more and more on credit the first key reason is that the availability of credit is like never before take a look at this particular chart and what you will notice is that right now the world is sitting on its highest ever debt it debt is only created in the economy when the credit uptake so to say is high because more money is there in the economy more the people can borrow it now comes a very interesting point that rich borrow for good purposes for investing in assets the poor take like Consumer Finance Loans they will go and buy like Emi zero costem so I will go and buy like iPhone 15 I will do all that stuff rich people do it to create an asset poor people use their debt to do what to create liabilities and this is being encouraged more and more due to easy availability of credit now a natur question okay when it comes to Consumer Finance Loans in India Consumer Finance loan means that when you're taking loans to buy like an iPhone or when you are taking a loan to buy like some you know AC fridge all that stuff so those are Consumer Finance so in that respect why is it that so much Consumer Finance in India is being given out right now because I earlier spoke about the fact that our GDP per capita is very low right so natural then defaults can also happen right in Consumer Finance space uh so why is it that consumer finance companies are lending out so much money just irrationally okay there is a very good explanation and societal explanation on this the explanation there is that see India is a status driven Society family K and all that now if you study history basically during our parents grandparents time taking a loan was considered to be bad loan it was not as if you know for every single thing they are taking loans probably only to buy like a car or a house people used to take loans during our parents grandparents' generation now the loan taking culture has been on the uprise and people are taking loans Willy neilly literally for everything now who would be availing these loans these would be availed by normal people Sal right maybe we are making like 15 20 25 30,000 we want to buy an iPhone one and a half lakhs loan right and over one one and a half two years we will repay it so that is the intent with which they borrow money then what ends up happening that sometimes bad situation comes in the economy person might lose job what would the Consumer Finance Company do I will honestly tell you these are stories that I have heard so basically what ends up happening is that many consumer finance companies have access to your phone data they have access to your contact list first they will call your wife then they will call your extended family and then finally they might start calling people from your work your ex- colleague or if you have recently joined another company they might start calling there also this is actually happening I'm not making up these stories these are stories that are out in the open Google read about it and therefore you need to be very very considerate in terms of availing the loans don't just simply Avail the loans just you know go and take so much loan so much loan because it is available at 0% no it is not available at 0% let me explain this through Point number two that people take more and more loans because they don't understand the true cost of taking loans now what do I mean when I say that people don't understand the true cost of taking loans so let me explain that by using that 0% Emi thing whether that is actually true or not so here is a practical example so let's say that apple is a company and what would typically happen in the old days or like maybe four five 10 years ago what used to happen was that Apple used to sell their product let's say $100 iPhone they would give it to a retailer at let's say $90 right and here the retailer got like a 10% discount so what would retailer do retailer will run like a 5% discount account and will pocket rest of the rough 5% gains rough Moy miy math I'm trying to tell you so that you get the simple example so basically the selling of the phone between retailer and end consumer used to happen through what through the process of discounting 5% 10% 15% 20% discount so people were running and buying stuff right whatever stuff be it clothes be it phone this that then what started happening was that these people came out with really interesting offers in fact these and these combined they came out with the concept of zero cost Emi now what happens in a zero cost Emi let me try to tell you right so for example take a look at this so here if you assumed that the cost of a mobile phone was 15,000 then in Old Times what used to happen was that the retailer who was purchasing it would buy it at a discount of how much 12,750 so this is the price at which the retailer would have procured the phone now that retailer might offer you let's say a th000 rupee discount and you are done right so you'll be very happy you know I got like 1,000 rupee discount and the retailer is also making money along the way now what they are doing is that they are still procuring the mobile phone at 12,750 right now what they interestingly do is that they will sell you at 15,000 but they will say that hey this has an Emi of 0% they already include this cost of 2250 which is your Emi for the next few months em payment so they already adding this to the entire mix and selling it to you so that is the problem so when you see 15,000 with an Emi option of 0% Emi this 2250 has already been including into it so therefore it's just a trickery you feel that you're getting a 0% free interest rate and all that stuff but in actuality this is just Financial ignorance that people are getting into these type of schemes and now unfortunately this has become a standard practice that hardly people are using their brain of Emi 0% no one is looking after discounts also and people are just somehow assuming that they are getting very useful deal but this is actually not the case and you need to be aware of this now the third reason for the loan uptake in India or credit uptake in India is the creation of aspirational culture for example if you go to Dubai right so I was recently there so I will give an example from there so Dubai you know you will just feel that people just have like a lot of money Glitz glamour this that stuff and everyone is spending money spending money spending money like there is no tomorrow but the interesting bit about the Dubai Society is right they have money to spend because a lot of rich people from like Europe lot of rich people from America lot of Rich Asians have migrated there so to say or are spending significant time there for tax saving purpose or whatever purpose so so but what it does is that it creates an aspirational bubble so to say that for example if you're seeing everyone in your class owning an iPhone what would you feel you'll see yeah I'm using like this phone everyone has like iPhone that becomes your standard that becomes your aspiration to go to so you feel that for you'll ask your friend how did you get this iPhone 0% em 0% so I ask my dad also so you'll then go and ask your dad and your Poor Dad unfortunately might not know this and what is the sum total of all this so you can clearly see that the companies for example Apple make crazy amount of money even retailers are able to sell more phone who is the one who is actually getting hit by all this it's you now you'll say no you know government is there to protect us well it's a joke that you are being protected by that now why because you now need to think about the incentive structures so let me now talk about Point number two is why is it that the governments are not addressing this particular problem so for that you need to understand the concept of GDP now GDP can be defined in numerous ways for example one way of defining GDP is that it is the sum total of the total goods and services that are produced within an economy that's just one definition another definition of GDP is this so here I am reading this definition from britanica and what you will see is that the GDP can also be computed by the total government expenditure plus net exports plus investment plus consumption this is an important tab so if you actually end up consuming more phone and all that what happens to our GDP our GDP actually goes up and who celebrates the most when the GDP goes up you guys can guess okay so this is one the second key point is that the government is actually punishing Savers how is this happening for example think about it of some of the tax rules that have been introduced very recently for example the indexation benefits on debt based mutual funds they have been done away with so your return has come down so will you invest more in mutual funds or will you not the short answer probably is a no that you would not consider doing it because you will think inv right that what's the point of investing if you end up making money capital gains tags or security transaction tax though GST though on top of that on top of like you know indexation benefits also withdrawn then what's the point of actually saving an investing now some cultural junkies they have also started with the rant that you know what this Co type of 2020 situation can also happen anytime so you should enjoy your life this is an argument that I've heard so many times that think about it this way that during covid many people unfortunately lost lives due to the lack of money that was there in order to quarantine themselves when they were impacted by covid they set up like hospital beds within their own houses do you think that all that did not require money well it did but the picture that has been built is that the more you consume the happier you will be all that nonsense look at what is happening in the US people have been so fed up so fed up of this consumeristic culture that now a lot of Americans are moving to Southeast Asian countries bunch of other lowcost countries people are not just surviving on debt the happier societies are the ones that do not Define themselves with excessive materialism and they spend within their means that is a very important point that no one is highlighting these days with that said let me move on to the final point that see so let me speak about how you can actually use this trend in order to make money for yourself and actually get rich from all the stupidity that is being exhibited in the world so number one option is that you need to be sensible in terms of what you are spending your money on please remember that the things that you own will end up owning you right so please be sensible about that fact if you cannot afford to buy something twice please do not buy it once please do not get into that rat race first save then spend this is literally the first rule of investing this is basic common sense right that's one second key thing look at the trend credit card companies are making crazy amount of money let me share McKenzie Report with you and this is the am amount of money credit card companies are making per account so you can see that pre-tax profit per account is roughly like $240 for credit card companies which is absolutely massive and US data which is very clean data so to say some similar trend is going to happen in India so my strategy is very simple that I'll pick credit card companies and invest in it now this is not a stock recommendation advice I'm just sharing a mega Trend that will only strengthen with time right so if you are someone who is just looking around in the world and thinking about all the madness that is happening this is a very simple Trend that you can think of a related Point here would be that majority of the credit card companies are integrated within banks in India for example HDFC credit card company HDFC is a bank in itself SBI on the other hand has a specific vertical or a specific listed company called as SBI cards so different but most of the banks have the credit card or card business subsumed within it so banking industry is something that will grow quite exponentially with time this is a mega Trend that is happening and it will continue to happen people just look at like 3 4 months HDFC Bank fell by like 2% 3% this that think about it guys I mean these are like Mega Trends who do you think is going to shape this right even when it comes to bnpl and New Age financing they are all partnering up with big Banks right so building a long-term position in these Banks is going to be actually useful so that is when a dream run on banks could start if you consider such a elongated Viewpoint now third and final point I keep on repeating is that please please understand the difference between good debt and bad debt good debt is something that allows you to create an asset for example if you are taking a loan in order to buy a commercial property or a property that can be used for commercial use it's good at it right it allows you to create an asset or a cash flow for yourself on the flip side if you are taking a loan to buy a phone or if you are taking a loan to buy a mic please don't do it it will just ruin you many people are getting ruined so it is my humble request please understand what the credit flow in the economy is how you are being triggered programmed every single day in order to bankrupt yourself and your families please do not fall into that trap learn about Finance study Finance if you are someone who is looking to start your investment journey I would highly encourage you to watch this video how you can go ahead and purchase your first ever stock it will give you a lot more Consolidated points on how to build your portfolio so if you are new if you do not understand much Finance want to get started want to get a better understanding and grasp on these topics definitely go and check out this video I hope you enjoyed this one do press the like button and I will see you soon

Channel: Akshat Shrivastava

Views: 511,932

Keywords: akshat shrivastava, cases over coffee, wisdom hatch, wisdom hatch courses, stock market courses, akshat shrivastava courses, stock analysis, indians buying on credit, phones on emi, iphone on emi, 0% emi, no cost emi, loan taking in india, credit economy in india, rise of credit culture in india, india youth problem, sbi cards, banking stocks, banking sector in india, hdfc regalia card

Id: -mmGAtNEdjk

Length: 20min 37sec (1237 seconds)

Published: Fri Oct 20 2023