The government is projecting a 5% growth this year, and the estimates do support this projection.
The government is projecting a 5% growth this year, and the estimates do support this projection. Data on lending shows that the economy may be looking at a protracted slowdown. Lending data for ten months till January 31, released by Reserve Bank, shows a growth of 3.5%, just half of what it was during the corresponding period last year. When compared to the data for the full financial year, growth has fallen about 8%. During this period, credit to industry showed degrowth of 2.4%. This figure was 2.4% for April-January last year. For the full-year period of FY19, lending to the industry averaged 6.9%. The most significant decline was registered by large enterprises where credit degrowth was 2.8% as compared to 2.4% growth in FY19.
This is also evident from the decrease in manufacturing value-added seen over the last two quarters. This was also the first time that manufacturing registered negative growth in two consecutive quarters since the start of the new series in 2012. Although agriculture did better in terms of value-added, loans to agriculture are still lower than last year. Personal loans, however, has been increasing. Within this category credit card debt was higher as compared to last year, while education loans were on the decline. People taking on more debt, when the industry is not performing well, and the economy is slowing, is never a good sign. The government will need to take some drastic measures if it is to get the economy back on track.