India Rising

From the Washington Post: Indians Trapped by Debt as Easy Money Dries Up.

In the past two months, Ravinder Raina tossed and turned on many sleepless nights trying to re-do the math of his family's monthly expenses.

Rising mortgage payments, soaring inflation and fuel prices were beginning to put the squeeze on the spending spree he'd taken for granted for the past four years. So after painstaking discussions with his wife, he drew up a list of expenses to cut. The family would stop buying famous-brand clothes. They would not window-shop if they did not need anything. They would use credit cards less and replace their gasoline-fueled car with a vehicle that uses cheaper natural gas.

The past four years have brought India economic growth of seemingly unstoppable momentum, often 9 percent a year, helped along by big inflows of foreign investment. Rising incomes and low interest rates enabled many middle-class Indians to realize the dream of owning a home, even while still in their 30s.

Trapped in debt, many middle-class Indians are struggling to cope. Raina's monthly mortgage payment has gone up by 12 percent. "I have to cut corners now, or I may not be able to pay back my loan before retirement," he said. Payments on some loans have doubled since 2004, when interest rates were at a record low.

"The boom of the last four years mesmerized them to live beyond their means," said Deepak Raheja, a therapist who runs a support group called the Hope Foundation. "In the past ten weeks, I am getting five to six new patients every week with financial worries about mortgages, loan repayments and credit card bills. All in the age group of 25 to 40. They exhibit anxiety, helplessness and depression. Some even contemplate suicide."

"The Indian middle class is now deferring purchase decisions because they are locked in the rising mortgage trap from multiple loans. They did not anticipate this cash crunch. They thought India's growth story would only go up, up and up," Bijoor said.

Gee, where have we heard that "up, up, up" before?