The declining growth efficiency of credit
With bank credit a less efficient engine for delivering GDP growth, the debate should shift to other elements driving growth
That credit-fuelled boom-bust cycles are common globally has been adequately reinforced by the financial crisis. But in India, where the loan-to-gross domestic product (GDP) percentage is just in the fifties, this discussion has largely remained academic. But we need to look at it differently, now that banks are being exhorted to expand lending in the belief that it will reignite faltering economic growth.
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