Is Debt the New Working Capital for Millennials cover

Is Debt the New Working Capital for Millennials?

Millennials Debt – The New Working Capital: The need for capital is the need of the hour; from growth to survival, money has become a vital non-natural resource. From an individuals’ need for basic necessities to running a business, the one-stop solution is capital. So what solves this need of capital? Either earn or borrow. Yes, ‘Debt’ is the easiest and the quickest way to fulfill the demand for money that exists in the economy.

The demand for money is a never-ending phenomenon and its mismanagement has been the root cause of some major financial debacles in history. Like the Bank’s NPA crisis, where hefty loans were distributed without measuring the exposure to the risk in a systematic way which made them bad loans leading to default in repayment. The NPA crisis in India started with NBFC’s, which was followed by the liquidity crisis, damping the economic growth of the country.

History has always given us a lesson and one must learn from it. Is the current debt-scenario of the new rising population of ‘Millennials’ in jeopardy? Let’s find out in this read.

The current scenario of ‘Debt’ among Millennials

Of the total population in India, Millennials account for almost 35%. As per a recent survey by CIBIL, it was found that, of the total loans sanctioned in India in the year 2018, around 39% of the loans were sanctioned to the Millennials group and these are increasing by every passing year.

As per CIBIL’s study, almost 72% of loans are for credit cards, personal loans, and consumer durables, and these come under the category of unsecured loans. While secured loans for two-wheeler and auto loans contribute 9% of the total loans.

Why are Millennials taking more and more loans?

The generation of Millennials is building a new spending culture and their rate of expenditure is on the rise. Where India is known for its saving culture, a new change in people’s lifestyle is pushing them towards a spending spree.

millenial loan - why are millennial taking more and more loan

Millennials (aging between 18 to 35 Years) need for a loan and the rising burden of their debt is majorly driven due to the following-

— Education Fees and Related Expenses

Education is every individual’s right. But this basic right costs too much. Higher education standards have substantially risen due to more and more private universities entering the industry with better quality and demanding a hefty fee against it.

Further studying abroad has become a new trend among the youth and hence calls for money demand. The education industry doesn’t just stop at institutes but also includes coaching classes, which prepare the students for competitive exams. The importance of education can never be debated and hence no matter what, one will always look forward towards fulfilling this need. This adds to the need for an education loan.

— Vehicle Loans

In today’s modern world social status plays a very important role and it has become important among individuals to keep up with their social status. Having a self-owned car or a bike is one such way of giving meaning to social status.

— Marriage and Related Expenses

This is another industry that has shown an exponential rise over the last decade. Bollywood has always had a huge impact on its viewers. Movies showcasing high budget destination weddings, designer outfits, jewelry, party, etc. have had a huge impact on its audience leading to rising marriage loans.

— Travel and Leisure

Travel is another industry, which is surging. This includes a major chunk of the population attracted to foreign travels like Europe, America, Islands, etc. These trips cost huge and again add to the demand for money ultimately influencing people to borrow more.

Leisure activities like frequently going out for movies, parties, concerts, etc. have become an integral part of one’s busy life and are a stress buster, which further adds to the need for money.

— Ease of Borrowing

Technology has become a pillar of our lives. It has influenced our lives for good. Traditional lending platforms i.e. banks are now being accompanied by some new lending platforms like P2P (Peer-to-Peer) players such as IndiaLends, i2i Lending Lenden, RupeeCircle, CASHe, etc. These platforms have made borrowing easy by reducing the paperwork hassle and making everything online and at lower borrowing costs.

Additionally, these platforms also provide a loan with very small ticket size like of Rs.500, etc. and for a short duration like a month or a fortnight, which makes them much more attractive.

— Other Factors

Medical, Housing loans, Personal loans, etc. are a few other requirements shaping the demand for loans.

Also read: Good Debt vs Bad Debt: What You Need to Know?

Is the rising Debt Burden on Millennials Good or Bad?

‘Debt’ has always had a negative image on the financial minds. This is one of the major reasons, which causes panic. Hence millennials’ rising dependency on loan is an issue that needs to be addressed.

In order to understand the risk associated with millennials’ debt, one needs to understand whether they have financial literacy and awareness with respect to this.

As per the data given by CIBIL, millennials who have a CIBIL credit score of less than 700 have improved it by an average of 65 points within six months of checking their scores. Further, the data also revealed that self-monitoring millennials have an average score of more than 740, which is higher than the non-millennials average score of 734.

An increased dependency on easy credit has made our lives simple but are we aware of the consequences if things go south. The lending platforms and banks over the past few years have been engaged in awareness activities of the customers in order to make them financially literate and conscious of the risks associated with borrowing and its defaults.

The data given by CIBIL directs us towards the fact that currently the debt-scenario among the millennials is under control and hasn’t shown any signs of another bubble ready to burst. But the question is for how long?

The new wave of digital borrowing and banks becoming more inclined towards retail loans are both changing the basic nature of India as a ‘Saving Economy’ towards a ‘Debt-Driven Economy’.

The past financial crisis like the 1929-30’s Great Depression, 1980 Savings and Loan Crisis, 1995 Dot Com Bubble, 2008 Financial Crisis and many have impacted the world economy but the Indian economy’s saving culture has saved us from all of them by absorbing the loss. The saving culture has always provided a thick cushion and protected people. Having savings reduces the financial dependency on institutions and government thereby reducing the exposure of the crisis.

Closing Thoughts

The world is advancing towards new technologies and new means of living but compromising on the old ways might cost us heavily in the next financial crisis. Nowadays the banks are selling loans rather than emphasizing the deposits as such. Household debt in India is more than the household savings. We must think twice about how much are we saving to keep our future secure and financially sound.

One of the biggest rules in finance is to manage the risk and so we should stay a step ahead in analyzing this new debt-culture and how can it be managed in order to downside the risk and avoid another crisis.

Online Grocery Market Overview & Future in India (2020) cover

Online Grocery Market: Overview & Future in India (2020)

An overview of online grocery market in India and it’s future: We all evolved from living in a world with no Internet to living in a world that cannot be imagined without Internet. Yes, we exist in the era of digitisation. From our daily needs to our daily activities we are surrounded by online apps, which have now become an integral part of our lives.

This article is to throw a light on how digitisation is taking over the ‘Indian Online Grocery Market’.

Food & Grocery Market in India stepping into the Digital Age

Let us recall the time when the only means to buy groceries was from brick & mortar stores or roadside peddlers and hawkers. From the time of stepping outside of home to the time when one can buy from home just at the tip of the hand, the Indian Grocery Market has enlarged.

In the year 2018, online F&G i.e. Food and Grocery stood at approximately $1 Billion and grew at almost 110% CAGR in its initial years of penetration from 2014 to 2018.  The online F&G market in India as of CY19 accounts for almost 0.2% of the overall market share. It is expected to reach 1.2% and touch a $10.5 Billion by the year 2023.

However, the offline F&G dominates the market and holds the maximum share but the dynamics of this industry are changing drastically. The online F&G is growing by almost 25-30% rate and the anticipated CAGR for it is 66% from 2018-23. (Source- LIVEMINTFinancial Express)

Market Players in Online F&G Market in India

Big basket groffers eat fitOnline Grocery Market Overview & Future in India (2020)

The rising start-up culture across the globe was the foundation that supported and motivated the application based modern age ideas like Byju’s,, Flipkart etc. Among these, the start-ups in the F&G industry were ‘Big Basket’, ‘Grofers’, ‘Ondoor’, ‘Godrej Nature’s Basket’ etc.

Moreover, in all of these, the most popular ones are ‘Big Basket’ and ‘Grofers’ with 1,00,000 and 40,000 orders in a day.

Apart from the newly established companies in this online space, there are few other giant offline F&G retail players that are now entering the online-based selling like ‘D-Mart’; ‘Reliance’ etc.

Additionally the large e-commerce players like Amazon and Flipkart’s FarmerMart have also initiated their operations in this segment. Online food delivery platform ‘Swiggy’ owned ‘Supr-Daily’; Dunzo; Milkbasket etc. are some other popular players.

Key Factors Influencing the Growth of Online F&G Industry in India

— Changes in Consumers Purchasing Patterns

The changing behavioural patterns in consumers purchasing habits is one of the most influential factors that has encouraged the ‘Online Grocery Market’.

With the rising e-commerce, consumers are more inclined towards purchasing online at the tip of the palm. The online transaction value of a retail shopper buying at-least once in a month is between Rs.900-1200.

It is a commonly notable habit nowadays where an individual with a free time is mostly scrolling through his/her social media accounts or other app-based services offered online.

— Convenience

Taking out time from a busy work schedule in office along with tiring days calls for much more suitable and convenient ways of living. Online purchasing is one such means, which eases one’s effort and offers a hassle-free purchasing from anywhere and at any time.

— Offline Players entering App-Based Online Space

On one hand where online purchasing is seen as a new way of living some others are facing a high competition and business model threat from the same.

Giant offline store-based retailers like D-Mart and Reliance, are now extending their operations from brick & mortar supermarkets to online-based selling websites. This implies that the how much big competition and opportunity is this online retail industry.

Business Model

In order to succeed must have a strategically proven and tested business model that forms a strong base for the business idea. Selling groceries online is an idea which is supported by two types of business models-

Online Grocery Market of India and It’s Future image

Internet Penetration

The average rate of using Internet per user is increasing at an exponential rate. With JIO’s price disruption the price for using Internet went down drastically and so the usage of Internet went up within last few years. Telecom operators are introducing more cheap plans for its users, which have increased the user dependency on Internet and related activities.

Indirectly this led to benefitting a large number of e-commerce players. Due to low-cost Internet, its accessibility among lower income level groups also increased thereby creating a larger customer base for online-based businesses.

Heavy Discounts and Offers

In order to attract a large number of customers these online F&G players offer huge discounts and cash back schemes. Selling at high discounts calls for the ability to absorb losses as well. Being backed up by large private equity investors like Softbank backed Big-Basket, these players are well funded and stable financially. Thus having an added advantage.

Low Cost of Establishment

The biggest expenditure for an offline store is the cost of establishing the store, which demands a suitable location, rental cost, construction cost (for self-owned outlets), staff salary, maintenance and other expenses. While on the contrary, an online store saves on all these costs.

 — No-Geographical Barriers

A brick & mortar outlet calls for physical location and has a limitation of serving that area only, an online store has no barriers of servicing a specific area. Although it calls for a strong supply chain to reach interiors but this has been overcome by the online operators.

Other Benefits

No time bound purchasing as apps are working 24×7. A wide variety of products are available. Certain players like Big-Basket offer specific delivery time in order to confirm the availability of the customer at the time of delivery and enhance consumer experience. Websites have a customer feedback on the product, which gives a much realistic view before purchase.

Drawbacks of Online based F&G Industry

Like every coin has two sides, similarly, this attractive online F&G market has its own limitations.

On one hand, where it is highly convenient and user-friendly it has its disadvantages like there is a lack of touch of the merchandise before purchase, frauds associated while purchasing online, delay in delivery, damaged or expired goods delivered, vegetables and fruits ordered online may not be fresh.

The rising awareness of health and eating healthy food raises concerns about buying groceries online.

Also read: A brief study of Petrol & Diesel price history in India


Consumer behavior is a very crucial aspect of any industry. Where we are witnessing newer business models with every passing year based on the changing preferences of consumers, online business models are on the rise. This is due to the changing habits in our daily lifestyle. The future of online grocery market in India only looks bright despite its drawbacks that are being resolved by the existing players, and is an opportunity to make big money.

The existing online F&G market is at its nascent stage and is growing with more and more opportunities.

The On-going Oil War (2020) - Causes & Effects

The On-going Oil War (2020) – Causes & Effects

The On-going Oil War (2020)- Causes & Effects: Global demand for energy is an upward moving trend-line majorly due to the growing and developing economies. As per EIA (U.S. Energy Information Administration), there would be an almost 50% increase in the world’s energy usage by 2050, which will be led by growth in Asia. Crude Oil contributes the maximum in energy production worldwide.

oil war global energy demand

Oil isn’t just an energy source but a highly valuable commodity of the global economy. It has always been the most sensitive and influencing element when it comes to global trades, deals, and even wars. But the question is why so, what gives oil such immense governing power? Let’s find out in this piece of article.

The Global Oil Market Explained Briefly

Energy is one of the major underlying factors, which is running the economic activities. Brent Crude Oil contributes the maximum to the world’s energy production and consumption. Additionally ‘Crude Oil’ is the world’s largest traded commodity. This gives the oil an immense power to rule the global economy.

USA, Saudi Arabia, and Russia are the top three oil producers respectively, hence top oil-exporting countries followed by other Organization of the Petroleum Exporting Countries (OPEC). On the other hand, the world’s major oil consumers are the USA, China, Japan, and India. Both, the top producers as well as consumers of crude oil hold the maximum influential power on the global oil markets due to their high market shares.

oil war - crude oil production

(Source- Baker Hughes)

Why is the Global Oil Market in Crisis?

A recent outbreak of the pandemic ‘Coronavirus’, which started in China, has not just emerged as a threat to human life but has also turned out to be the root cause of unhealthy and unstable global economy.

oil war biggest one day decline

China happens to be the major source of the global supply chain. Being the epicenter of the virus outbreak, China’s economic activities slowed down which hampered the global demand and supply scenario. Furthermore, other infected countries like Italy, America, Japan, etc. are on a lockdown in order to contain the virus.

The demand for oil fell in the last few months due to contracting economic activities around the globe and especially in China, which is the largest oil importer, subsequently this led price drop of oil in the global market. But the falling prices of the commodity fell even steeply than estimated as Saudi Arabia and Russia, two largest oil producers locked horns with each other. 

The Beginning of ‘Oil-War’ in 2020

‘OPEC+’ (OPEC countries & Russia) recently held a conference in Vienna to come up with a contingency plan on the falling oil demand and subsequently falling oil prices. As per the International Energy Agency, the demand for oil will fall by 90,000 barrels per day accounting for the recent outbreak of ‘Coronavirus’.

As a solution, OPEC suggested a production cut in oil in response to falling oil demand, and stabilize the subsequently falling oil prices. But OPEC’s failed effort to convince Russia on the same led to the ‘Oil-War’.

On Russia’s disagreement to cut the oil production, Saudi Arabia member country of OPEC announced to increase its oil production followed by cutting its export prices of oil by $11, making the price $34 per barrel. This move by Saudi Arabia hurt all the other oil-producing countries.

Why did Russia refuse to cut Oil production?

Russia’s refusal to cut oil production and stabilize the price is explained as its way to hurt the USA’s Shale Oil Industry, which is one of the largest oil producers. Lower price per barrel will impact the USA’s Shale Oil margins. The oil extracting cost for USA is high, hence falling oil prices would further impact the profits for US Shale Oil companies.

How is Oil-War impacting oil-producing countries?

A beaten oil price, which is down by almost 25% due to on-going ‘Oil-War’, has some major implications. Being the most highly traded commodity, tanking oil prices is going to impact the revenues of the oil-run economies heavily. It is too soon to analyze the measure of the impact but, since the world’s economy is highly correlated to oil-prices and its demand, we can only imagine the impact if it gets worse.

What will be the impact on oil-importing countries?

 While it only seems logical to say that tanking oil price is an opportunity of biggest oil importers like China, India, etc. but it isn’t that simple.

China, which is the largest oil importer and accounted for more than 80% of global oil demand growth in 2019, has already cut its oil demand 20% in February 2020 due to ‘Coronavirus’ impact. As a chain event similar fall in demand is seen worldwide. (Source- IEABusiness Insider)

Tanking oil price seems attractive to oil-importing countries, as it contributes to huge savings. But the scenario is a little different. Buying cheaper is profitable but with less demand, the benefit will not be passed over to a great extent. 

Also read: Coronavirus- How it Infected Stock Market & Indian Economy!

On-going Oil-War, will it continue for long?

The current scenario of the global oil market is dicey and uncertain. The extent of domination that oil has on the economies worldwide only points towards one direction that longer the war continues higher will be the impact.

Saudi Arabia and Russia both are oil-driven economies and hence affording a tanking oil-price for a longer duration will only hurt their economies in the long run.

On the other hand, USA’s influence on the global output of oil is not nothing. It is the largest oil-producing country, thus it can also influence majorly. However Trump hasn’t announced any move to secure USA from the current oil-war scenario, but that doesn’t make America vulnerable. If the oil-war continues sooner or later we might witness a power play by America.

It is evident from history that geopolitical tensions like the ‘US-China Trade War’, have only resulted in damages. However, where few suffer some others might take advantage. Only time will tell what turn will this ‘Oil-War’ take.

impact of coronavirus on stock market

Coronavirus- How it Infected Stock Market & Indian Economy!

Impact of Coronavirus on Stock market and Indian Economy: The Indian stock markets have been in turmoil over the past few months due to slow economic growth. The market was only recovering with government taking some major initiatives like rate cut in corporate tax, infusing money in the economy, disinvestments, lowering repo-rate, etc., until another crisis hit a new wave of major economic slowdown pushing the indices (SENSEX and NIFTY) to their decades low.

In this article, we’ll discuss what exactly is ‘Coronavirus’ crisis and what are the impacts of coronavirus on stock market & Indian economy. Let’s get started.

What is the ‘Coronavirus’ crisis?

COVID-19 a pandemic most commonly known as ‘Coronavirus’, which started in China has now breached the international borders and has spread to nations across the globe. Among the infected nations some of the major economies that are facing severe damages are South Korea, Iran, Japan, Italy and now India has been added to the list.

The nations are not only facing a loss of life or an exponential increase in the number of infected individuals, but the economic growth has also been dented by this pandemic.

The global economy is facing a rough time due to the outbreak of the ‘Coronavirus’, which started in China. ‘China’ is the worlds’ largest manufacturing hub and one of the largest exporters of goods. China accounts for almost 16% of global exports.

Being the epicenter of the virus the economic activities in China contracted as the health emergency called for shut down of offices, factories, schools, etc. This contraction had a dominos effect on the economies across the globe as a majority of ‘supply chains’ globally are sourced from China.

How is the exposure of ‘Coronavirus’ impacting the Indian Economy?

India is China’s second-largest trade partner making the trading roots even deeper and hence the impact on Indian markets is huge. India happens to be a net-importer from China. India’s merchandise import from China accounts for almost 18% of its total imports from around the world, while the exports account for almost 9% of the total exports around the world, as of CY2019.

Due to the economic activity contraction in China, industries and companies directly related to imports and exports from and to China are facing a crisis. Some of the major sectors affected in India are-

  • Auto-ancillaries imports constitute 18% of total imports from China, whereas tyre imports include approximately 30% of imports from China, resulting in a shortfall of raw materials and auto-parts for OEMs and automobile manufacturers.
  • Consumer Durables industry imports constitute almost 45% of total imports from China making it highly reliable on Chinese manufacturers.
  • 67% of electronics (mobile phones, laptops, etc.) are imported from China. Due to a high dependency on Chinese imports, the domestic contract manufacturers will only be benefited marginally as the manufacturing capacity in India is quite low in comparison to China. Hence domestic industry players cannot fill the supply gap.
  • India exports around 34% of its total ‘Petrochemicals’ to China. As a result of the contraction in the economy, the demand will fall and the prices of petrochemicals will take a hit and margins will be under pressure.
  • Pharmaceutical Industry imports around 69% of its pharma drugs and intermediates from China. However, the companies have maintained enough stock for 2-3 months promising a less affected Q4FY20.
  • Others- Gems and Jewellery (India exports 36% of diamonds to China); Seafood (India’s exports to China accounts for ~22% of its overall seafood export); Solar Panels (India imports ~70% of solar modules from China); Shipping & Logistics (China is the largest consumer of Iron Ore, Coal, Oil & Gas hence affecting the demand and trade via sea-routes); Textiles (India exports 27% of total cotton yarn to China)

(Source- CRISIL February 2020 Report)

Market discounts information on a real-time basis, thus the aftereffect of the virus outbreak on the Chinese economy and on the above-listed industries and sectors can be seen evidently as the stock prices of related companies and sectoral indices fell in the past one week. Negative investor sentiment can be directly witnessed with the market breaking down to new lows with every passing day.

Further, the sectors and commodities, which are indirectly connected to the above-listed industries, will have a subsequent impact like the Oil prices falling, etc.

The weight of the above-listed Industries in the contribution of India’s GDP growth is high thereby affecting the economy at large.

India – Q4FY20 Outlook

The performance of Q4FY20 is still in question as many sectors like ‘Pharma’, sourcing supply chains from China have already stocked their inventories for almost 2-3 months absorbing the losses that could have occurred due to shortage of raw material supply. While on the other hand, the electronics market might take a major hit due to the shortfall of supply. Some of the top mobile phone companies like ‘Apple’, ‘One Plus’, ‘Xiaomi’ etc. have there manufacturing hubs in China, additionally among the top mobile phone companies majority are Chinese brands.

The uncertainty isn’t much as one can easily do the math of India’s dependency on China. Hence the answer is crystal clear. What needs to be addressed is to what extent can Indian economy be damaged and what will be the governments’ contingent plan to the bailout the Indian economy.

Though it is too soon to say the measure of impact, as Q4FY20 numbers are yet to come out.

Also read: Revisiting 2008-09 Economic Crisis – Causes & Aftermath!

Is the falling Chinese Economy a Silver Lining for India?

India has been running its own race to achieve a target of becoming a $5 Trillion economy. The economy has been thriving with the government taking some important measures to make India self-sufficient and attractive for foreign investors.

China is a world manufacturing hub and a net-export country. The dependency of the world economy on China is too high and hence, concluding that the current economic contraction in China is an opportunity for India is too soon and illusionary. Further, the manufacturing capacity in India is far too less than China and cannot be sufficient for an instant shift. A business shift takes immense time due to strategy and cost-effectiveness. Thus India might be a good substitute for China, but in order to replace China, it has a long way to go.

Future Outlook on the Dalal-Street

The root cause of the falling stock prices and indices is the uncontrollably spreading ‘Coronavirus’. The cure for the virus has not been found yet and the number of infected individuals has been increasing with every passing day.

The investors have become so pessimistic about the future outlook of the Indian economy, that pulling out money from investments looks much safer and promising to avoid further after-effects of the virus on the industries and economy.

The fall will continue until the virus is not controlled and continues to spread contagiously affecting the economies. Some positive outlook on the vaccination or control of this pandemic seems to be the only solution that can rest the fear of the investors.