India’s consumer spending has improved steadily this year as the effects of the covid-19 pandemic wore off.
During April-August, purchases through credit cards rose to 5.56 lakh crore rupees ($67.2 billion), up 70.36% from the same period last year, the Indian Express newspaper reported yesterday (Oct. 24).
In September alone, transactions amounted to Rs1.22 lakh crore (pdf), primarily driven by online sales, Reserve Bank of India (RBI) data show. Of this, Rs45,287 crore was spent through point-of-sale machines of merchants.
The spending through credit cards even overshot debit card usage.
“The rise in credit card usage is significant as the interest rate charged by credit card issuers is around 38-42% per annum. If you carry forward the balance to the next billing cycle, the outstanding will shoot up and the card-holder will get into a trap if it’s carried forward again and again,” the newspaper quoted a banking source.
As of September 2022, there were 77.7 million credit cards in use, up around 20% from a year ago, according to the RBI data.
Despite a surge in consumer prices, most Indian households have been spending on essential items.
Nearly three fourth of the respondents in the RBI’s latest consumer confidence survey expect overall spending to increase over the next year, while 20% expect it to remain like now.
The current situation index, which indicates consumer sentiment towards present business and job market conditions, improved to 80.6 in September from 77.3 in July.
Some banks are, thus, aiming to expand the credit card business to semi-urban and rural markets.