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Sustainable recovery from industry still eludes
Jan 6, 2016

The economy continues to remain afflicted by the slowdown in investments from India Inc. In fact the manufacturing activity in the country has contracted in December for the first time in more than two years as per Nikkei's Manufacturing Purchasing Manager's Index. Resultantly, the bank credit offtake by the industry continues to remain weak. Of the total increase of Rs 2.4 billion in Non-food credit, during the period 20 March 2015 to 27 November 2015, the personal loan segment had a lion's share of 58.4%. In this segment, loans to housing accounted for nearly one-third of the total increase in bank credit. However, the increase in credit to the industry stood at a mere 5% during the period.

This shows that the retail segment is showing a pick-up in credit demand backed by softening interest rates. However, this alone cannot keep the flag running high as credit growth to industry remains anemic due to lack of investment demand. In order to stimulate the economy, the government wants to keep public spending high in the next financial year as well. With this regard, the government is contemplating to go slow on the fiscal consolidation target of 3.5% for FY17. Therefore, the much awaited economic recovery may still not be around the corner.

Data source: Livemint, RBI

This Chart Of The Day was published in The 5 Minute WrapUp - Is It Time for Buffett to Exit Amex and Wal-Mart?

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