Great India Place, one of India's biggest shopping malls, gives eager consumers the chance to browse in air-conditioned comfort, scout for global brands and sip cappuccinos after a hard day's shopping.

It also offers the opportunity to enjoy another capitalist craze -- debt.

It's party time here, said Nagendra Singh, a manager at Hometown, a 300-staff store that he describes as a mix of Home Depot and IKEA, and where free Hindu religious blessings come with the furniture package.

Customers find something interesting and they swipe their card. People don't mind swiping a card for one lakh rupees ($2,500), Singh added.

India's economy has grown at an annual average 8.6 percent in the last four years, sparking a consumer boom as credit cards and mortgages become increasingly popular for an expanding middle class. The majority of the population still, however, lives in poverty.

Store manager Singh said that free spenders were often young couples with nuclear families unfettered by the attitudes of an older generation that emphasized savings.

Total loans, including mortgages and unsecured loans such as credit cards, grew around 30 percent annually in the last three years, an expansion the Reserve Bank has called unprecedented.

But this year there are signs consumers and banks are starting to feel the strain of rising debts as the central bank cools inflation with higher interest rates.

Few analysts foresee any major risk for the financial system and most say some strain is inherent as India enters a competitive global economy. But the seeds of debt-ridden consumption in what used to be a country of more conservative savers have been sown.

Given rising consumer debt, one wonders if Indians are catching up with the West, or catching down, said V. Anantha Nageswaran, investment research head at Bank Julius Baer in Singapore.


Mortgage rates have risen to around 12 percent, from 6-7 percent a couple of years ago. Credit card rates have risen to between 20 and 36 percent. Late fees touch 50 percent.

Take house buying. The average owner now spends more than 50 percent of their monthly income on loan installments -- compared to 42 percent a year ago -- despite a 20 percent rise in monthly incomes, according to Crisil risk rating agency.

Some analysts worry banks have been lending too easily.

Once you have purchasing at this magnitude, and expansion of credit at this pace, banks are less careful over income recognitions, said C.P. Chandrasekhar, economics professor at New Delhi's Jawaharlal Nehru University

While bad loans were still relatively small, at around 3.5 percent of banking assets in 2006, Crisil said in a recent report that the possibility in deterioration in asset quality of retail loans cannot be ruled out.

Some consumers are already feeling it.

I earn about 25,000 rupees ($620) a month. Now most of my time is spent on finding money to pay back my credit card dues. Even when I drive to work on my motorcycle I am thinking of how to deal with my credit card dues, said Sunil Thakur, a car salesman.

He is also worried about the mounting interest burden on the mortgage his father took to build a house.

In Great India Place, adverts urge customers to pay in installments for cars and holidays. Few spenders appear worried about the future.

It's so easy to get credit cards. Banks basically force you to get one, said Shubhra, a 30-year-old IT worker shopping for clothes.

We'll continue spending, no matter the interest rates.