Graphic: Sahil Banga/Mint
Graphic: Sahil Banga/Mint

Where’s the economic recovery?

The contraction in bank loans to the industry in the June quarter has been far deeper in fiscal year 2016, with lending to medium-scale industry being the worst affected

Bank credit growth in the first quarter of the current fiscal year is much lower than in the corresponding period of last year. Between 18 March and 24 June 2016, growth in non-food credit was a mere 0.1%, compared to a growth of 1.1% in the same period last year. The initial date for computing bank credit growth is taken from the middle of March to avoid the window-dressing that occurs at the end of the month, as banks scramble to boost their deposits and advances at year-end.

As the chart shows, the contraction in bank loans to the industry in the June quarter has been far deeper this fiscal, with lending to medium-scale industry being the worst affected. The most robust growth has been seen in personal loans, although even here, the pace has slowed. The priority sector too has been hit.

These numbers raise the question whether any recovery is happening at all in the economy. We will now have to wait and see whether the Seventh Pay Commission bonanza for government employees and the good monsoons raise credit growth in the current quarter.

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