Saturday, December 20, 2008

How India survived the financial meltdown...

I just read this article on The New York Times, titled 'How India Avoided a Crisis'.

I ain't an economist, but as an Opinionated Indian, I got my views on everything... and finance is something I like to express my views on... rather these are snippets from my Ma's (Indian word of mother) advice.

There are few things, which, we people of India do... and because of them... India's economy is still strong and unaffected by this melt-down...

Loans are BAD!

My mom always says... Son! never take a loan.. its bad... and trust me I have never taken a loan in my life. The logic is simple, when you take a loan from bank or any financial institution, you spend the money easily, but it becomes real difficult to raise the same money again and pay the debt.

As most of the the Indians, rarely take personal loan, or create debts for any kind of flimsy need. They stay out of the credit-payment net... Well, but haa! when the need will arise I will take a home loan... just like other Indians do.

Credit Card is BAD!

India is a country where only 2-3 percent people have any kind of credit card, sounds unbelievable? yeah, but its true!

I got my first credit card just couple of months back, and I use it very carefully. I make sure that I got hard cash in my bank account, before I spend a rupee (counterpart of US dollar) through credit card. Rather most of the Indians prefer to pay hard cash rather then pay by check or credit card. Well, unintentionally, it helps them.

As they pay all cash, it helps them in remaining debt-free. Where as, people who have credit card, swipe the plastic and get into debts.

Saving money, SAVES!

One of the many words I often hear (just like other folks in India) from my Ma is 'SAVE', every time I visit her at her home, she unfailingly tells me to save money... make a fixed deposit in a government bank.

Indians, have this good tendency to save for bad times, this is one of the cornerstone of Indian culture. Any middle-income family in India, at any given point of time, has savings worth more then their yearly income. Also the Indian Income Tax Department (counterpart of IRS) gives tax benefits if you save money.

Invest in Real Estate and Gold

Indians often invest in Real Estate and Gold. Statistically its proven, that regardless of the downturn in economy, the value of these two things doesn't fall below 20 %

And these two assets, can be liquidated easily, without much depreciation in times of dire financial need.

Don't spend on unnecessary stuff!

Whenever I buy anything, My mom instantly tells me not to waste money on unnecessary thing.

Indians use a TV set for at least 10 years... Well, barring few exceptions, a TV set is something which is as a short-term home appliance in US. The underlying point is, Indians make maximum use of the stuff they have, and avoid spending on something which they don't need or can be avoided.

Whereas, folks in US spend unnecessarily on things which they don't really require... Say a iPhone 3G! I don't understand why its so hyped device in US, to spend 199 US$ (and a binding contract!) ? a normal GSM phone works just fine... as it does for me.

As I said, I ain't a economist and my Ma is not even a high school graduate. But what she understands and practices, most of people and businesses in US didn't...


  1. Got rid of my few credit cards several years ago and the only thing I invest my money in now is my real estate. Great Post....

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  3. thats absolutely right, as we are moving ahead lots of our ancient sayings are coming true....including of traditional Indian ones.

    Great Post:-)