Credit-less growth, despite rebound in GDP in June quarter

This column pointed out on 27 August the possible reasons for sluggish credit growth despite a recovery in the economy.

The most recent data from Reserve Bank of India (RBI) show that not only has credit growth been slow, but it has been negative in the current financial year for industry as well as for the services sector. The accompanying chart shows that while credit growth to industry grew by 2.1% between end-March and end-July last year, it has contracted by 0.6% this year. And while credit to the services sector went up by 1.9% over the same period last year, it contracted by 1.5% this year. Even the growth in personal loans has been lower in the current financial year and only agricultural lending has shown robust growth. True, bank cre

Let’s take a look at what happened in 2003, at the beginning of the great boom of 2003-08. As of 8 August 2003, growth in non-food credit (credit other than for the Food Corp. of India’s procurement operations) was 15.3% from a year earlier. On 8 August 2014, in contrast, the y-o-y growth in non-food credit was 11.9%. The fact remains that, in spite of the strong rebound in GDP in the June quarter, it has been a credit-less recovery so far.