SQUEEZED

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: Squeezed between loans engendered by the lofty dreams of the boom years and the prospects of layoffs in a slowing economy, urban India will have to make a few hard choices — financial and lifestyle-related — to survive this downturn
Tanvi, my teenage daughter, was completely awe-struck when she visited an ATM for the first time as a three-year-old kid. She enquired whether the machine would give us money whenever we needed it. I had to do a deposit transaction to show her that one needed to put the money in first. But that part had less of an impact on her little mind. The lasting impression she took away was that money was easy to get. In the boom years many of us have been like little Tanvi. It all seemed so easy. The harsh reality that money is but a limited resource, and has to be earned before it can be spent, is dawning on many of us only now.

First crisis
The current crisis is likely to snowball into an unprecedented period of indebtedness, job losses, and uncertainty for a large number of people. Perhaps many will experience these risks for the first time. The causes and effects are mostly sociological, and partly financial. So the solutions will also remain mostly outside the boundaries of pure financial decision making. There is no denying that spending beyond one’s means is not a trait to be encouraged. But the reasons why people end up in a debt trap are a combination of easily available loans at low rates and the starry-eyed enchantment with easy money. The socio-economic adjustments can vary widely, not just based on a rough classification I intend providing, but based on personal trade-offs one is willing to make.