Diderot's Curse and BNPL Trap: A Debt Crisis Looms

In 1769, French philosopher Denis Diderot received a luxurious scarlet dressing gown. At first, it delighted him. But then he noticed that everything around it—his old chair, desk, and rug—seemed shabby in comparison. One by one, he replaced them until he was mired in debt.

- Kiran J Mahasuar

This story, known as the Diderot Effect, remains a parable for how one act of consumption can trigger a cascade of financial decisions, often with ruinous outcomes.

Fast forward to modern India, where a digital version of this effect is taking shape. This time, it's not scarlet robes but smartphones, kitchen renovations, weekend getaways, and online shopping sprees—all made seemingly affordable by Buy Now, Pay Later (BNPL) apps and instant small loans. Yet, behind the glitter of financial empowerment lies a troubling spiral of overleveraging, especially for India's burgeoning middle class.

According to CRIF High Mark data, personal loans of ₹10,000-50,000 value grew at an annualised rate of 19% for the 2021-2024 period. BNPL offerings by fintech firms like LazyPay, ZestMoney (now defunct), and Paytm Postpaid have exploded in reach. But this rapid expansion masks a darker reality: a growing chunk of borrowers are falling behind on payments.