In India, about 440 million are millennials, and they form 46% of the current workforce, with 91% millennials making their own financial decisions. Unlike their previous counterparts, millennials have a better understanding of their responsibilities. For them, ‘standard of living’ holds a different connotation, and they are constantly working towards fulfilling it.
The social fabric of India is at the center of a transition where people are recalibrating their approach towards time and investments. Due to a proclivity towards nuclear families, increase in purchasing power of millennials and the high penetration of internet, Indians today are becoming more ‘Leisure Conscious’ and taking a breather to spend and focus on their own leisure.
While earlier spending money on an individual’s own leisure was considered an extravagance, today, it is not only regarded as an intelligent health decision but also presents an investment option to individuals. Before the financial period ends every year (March 31), working professionals get busy submitting proof of investments that qualify for tax deduction. Generally, loans are advised only for the purpose of creating an asset, such as buying a house or for investing in a business or for higher education. But in the recent past, consumption-related loans have seen good growth with people resorting to debt for buying cars, going on holidays, shopping, etc. Moreover, the number of people taking up personal loans for investing in tax-saving instruments is also on the rise, especially between December and March, shows data from FinTech companies. This offers them the dual benefit of Leisure Consciousness and investment options.
Now, 1 in 5 Leisure Conscious millennials say that they take up personal loans, but what earlier implied potential debt today means tax benefit. Due to this, there is a surge in personal loan applications by 31% during this time of the year, with ticket size ranging from Rs 10,000 to a maximum of Rs 1.5 lakhs. Research from 5,000 personal loan applications in the month of January 2019, indicates an increase in personal loan applications mainly for investing in tax-saving instruments under Section 80C. Leisure Consciousness means that in this decade this section of the Income Tax is the most popular provision because it allows millennials or tax-payers a deduction in certain types of payments and investments.
While the majority of a millennial’s monthly income continues to be spent on essentials, education, and utilities an increasing proportion is dedicated to leisure: entertainment and eating out (32.7%), apparel and accessories (21.4%) and electronics (11.2%). However, today young people have a lot to gain by investing in themselves and their leisure. If an individual takes a personal loan of Rs 1.5 lakh at an interest rate of 12% for a period of 1 year, the total interest payable comes down to Rs 9,928. This means an individual can save at least Rs 21,272 out of the total of Rs 31, 200 even after paying interest. Even in a situation where the individual has a poor credit score and gets a personal loan for 18%, he can still save Rs 16, 176.
This trend of taking credit for tax purposes is mainly seen in metro cities including Delhi, Bengaluru, and Mumbai where the ratio is 16%, 12%, and 8% respectively, but other cities such as are Pune, Chennai, and Kolkata are fast picking up the mantel at 6%, 6%, and 5%.
The evolving tax structure, globalization, and the increasing purchasing power are impacting the sales across industries, however, the chief driver of this trend remains Leisure Consciousness.
(Gaurav Chopra is CEO & Founder, IndiaLends)