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Bank Credit grows 14% - Views on News from Equitymaster
 
 
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  • Aug 10, 1999

    Bank Credit grows 14%

    The Centre for Monitoring the Indian Economy has revealed that the growth in credit by scheduled commercial banks has slowed down to 14% in June 1999 from 16% a year ago. The flow of funds to the commercial sector was up 17% YoY. Moreover, the report mentions that corporates have recorded their first increase in profits in nearly three years. On the macro front, the gross fiscal deficit (GFD) declined 6% during April - May 1999 over the corresponding period in the previous year.

    The importance of the figures lies in the fact that although overall credit growth may have slowed down, the credit to the commercial sector has grown at a faster rate. This is especially important from the point of view of the economic recovery that seems to be around the corner. Moreover, the first increase in profits in three years too has underscored the belief of an economic recovery.

    The fall in the gross fiscal deficit has been helped by the fact that the total tax collections have risen by 19% during April - June 1999. The sustained growth in industrial production is likely to boost the governments tax collections for the year, further reducing the pressure on the GFD. However, it is important that the fall in the deficit is due to a fall in the non-plan expenditure (subsidies, interest payments) or a rise in revenue receipts rather than plan expenditure (capital expenditure etcetera).

    The Indian economy seems to be gaining pace. This is evident from the expected industrial growth of 6% (CMIE estimate) during FY2000 (3.9% in FY99). The recovery is likely to be supported by a bumper kharif crop.

     

     

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