India’s credit-fuelled consumption boom
Only consumption booms that are accompanied by an increase in investments tend to be sustainable
India’s consumption growth has experienced nothing short of an explosion over the last five decades. The steady rise in India’s national income over FY06-12 at a nominal compound annual growth rate (CAGR)of 13% clearly had a primary role to play in driving the 12.1% per annum growth in private final consumption expenditure that India experienced over this period. The rise of “networks" was the second factor which is likely to have driven steady consumption growth as India experienced an unprecedented rise in telecom, financial and road networks over FY06-12. Robert Gordon in his book The Rise And Fall Of American Growth (2016) has shown the critical role played by “networks" in driving consumption growth in any economy. The relentless rise of these networks in India drove a rise in awareness as well as demand for a host of consumer goods, including mobile phones, cars, two-wheelers and houses.
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