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Indian Consumers Buying Levi’s Jeans on Installment Plans: Signs of Credit Bubbles to Come?

Americans are used to buying cars and appliances on installment plans, but clothes?  

The Financial Times reports that Levi Strauss & Co. will be offering its jeans on an installment plan to Indian consumers.

India has had a vibrant consumer economy for years, driven by a rising middle class.  We view this as a positive for the world economy; more Indian consumers means more global demand, after all.  But in our view, Levi’s installment plan marks a move in a very different direction.

The FT quotes Suhel Seth, managing partner of Counselage: “For guys in a village, a pair or Levi’s jeans is arrival and it marks a certain sense of equality with urban India.”

Hey, we support the rural Indian who is aspiring to better himself.  More power to him.  But in extending installment credit to rural Indians to buy expensive urban clothes that they cannot afford on their modest incomes, is Levi’s fostering the kind of lax credit environment that created our subprime debacle here in the United States?  

It’s obviously far too early to know if this story is more than an anecdote or if it marks the beginning of a trend of rampant credit creation in India, but this is something we intend to watch in the months ahead.

Charles Sizemore, CFA

Co-author of the recently-published Boom or Bust: Understanding and Profiting from a Changing Consumer Economy