Indian households piling up on debt, JP Morgan’s Sajjid Chenoy decodes consumption slowdown

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Updated: September 10, 2019 11:56:44 AM

NBFCs, India Ratings, NBFCs cash crisis, NBFCs growth forecast, non banking financial companies, नॉन बैंकिंग फाइनेंशियल कंपनियां, liquidity, real estateHousehold debt has gone up by 5% of GDP over the last 5 years, he said.

Even as the Indian economy continues to reel under a massive slowdown, JP Morgan’s Sajjid Chenoy notes that households are now facing a debt problem. “Household debt has gone up by 5% of GDP over the last 5 years. The household balance sheets now are in considerably bad shape than 5 years ago. Households will now build up precautionary savings and cut down on consumption,” Sajjid Chinoy, Chief India Economist at JP Morgan said at 6th SBI Banking & Economics Conclave. According to the expert, India is now facing structural constraints on the demand side. Sajjid Chenoy explained that it would be difficult for the economy to get back to above 7% growth in the near future, given the households’ leverage problem, as income growth has remained tepid in the last few years.

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“The consumption in the last 5-6 years has grown very rapidly. This has been despite low income growth. The rural wages have grown by 0.9% per year in the last 6 years,” said the expert. Until wage growth or employment growth picks up sustainably, India will not be able to go back to 7-9% consumption growth that was taken for granted earlier, he explained. Exports have also been structurally constrained, and the household leverage problem, that for me is the key challenge for the next few years, he added. 

After the Narendra Modi-led government announced a goal to reach the $5 trillion economy dream by 2025, Neelkanth Mishra said that India should grow a rate of 14-15 per cent in formal credit. There is almost a Rs 35 trillion shortfall to reach the target by FY25, Neelkanth Mishra, Managing Director and India Strategist, Credit Suisse said at 6th SBI Banking & Economics Conclave. Speaking at the same event telecast by CNBC TV18, Sanjeev Sanyal, Principal Economic Advisor in the Ministry of Finance said that a $5 trillion economy assumes exchange rate of 75/$ by 2024.

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