RBI reveals: Weak investment, stalled projects, grim profit, lowest credit growth since 1994

Non-food credit sector-wise

By Rajiv Shah
In an indirect admission that India's economy has been badly impacted by demonetisation and mismanagement, the Reserve Bank of India (RBI) has said that the growth in non-food credit -- extended by scheduled commercial banks to all other customers except the Food Corporation of India -- "reached a low of 5.8 per cent at end-March 2017, the lowest since 1994-95", even as underlining, the deceleration has continued thereafter.
The RBI's Annual Report, released early this week, further admits, "During 2017-18 (up to June 2017), overall credit slowdown has persisted with most sectors witnessing deceleration or contraction. While credit to industry continued to contract, credit growth to agriculture slowed down significantly to 7.5 per cent in June 2017 from 13.8 per cent in the corresponding period of the previous year.
The report says, "Credit to all major sectors, barring services, decelerated/contracted during 2016-17. Credit to agriculture slowed down to 12.4 per cent from 15.3 per cent in the previous year. Credit to industry, particularly infrastructure, food processing and iron and steel segments, has been contracting since October 2016. Credit to industry contracted by 1.9 per cent during 2016-17 in contrast to a growth of 2.7 per cent in the previous year."
It adds, "Credit to infrastructure (which accounts for about one-third of the outstanding bank credit to industry) contracted by 6.1 per cent in 2016-17... Within infrastructure, credit growth contracted/decelerated in respect of all major segments such as power, telecommunication and roads. Credit to textiles and engineering goods also slowed."
The only sectors which showed acceleration in credit growth are "fertilisers, petro-chemicals and construction activity", the report says, adding, "The overall contraction in credit to industry was due to the inter-play of several factors."
These were, it says, (1) investment activity has been weak in recent years, which has severely impacted credit offtake; and (2) within industry, several sector-specific factors contributed to contraction in credit.
Giving sector-wise details, the report states, "the power sector, which accounts for about 58 per cent of the outstanding credit to infrastructure, has been facing hurdles like stalled projects, operational inefficiencies and high outstanding debt."
As for those telecommunication industries, the report says, these were "experiencing declining revenue and a grim profit outlook due to technological innovations and stiff competition among the service providers."
Then, it adds, "The iron and steel sector was stressed due to weak prices and stiff international competition."

Non-food credit: Details

Giving a list of other factors which "drove down credit growth despite softening of lending rates", the report says, these were subdued state of economic activity, risk aversion in the banking sector with a legacy of non-performing assets (NPAs), capital adequacy requirements, and "disintermediation via increasing recourse to market-based instruments, such as com mercial papers (CPs) and corporate bonds."
The report further says, "Credit growth was also impacted by one-off/statistical factors such as loan write-offs, substitution of bank credit by UDAY bonds (floated by the Government of India as financial turnaround and revival package for electricity distribution companies), loan repayment by use of specified bank notes (SBNs) and banks’ pre-occupation with exchange of notes/deposits following demonetisation."
Giving details of credit growth slowdown, the report says, the "real credit growth showed a sharp deceleration to 1.8 per cent from 5.8 per cent a year ago", adding, "In terms of intra-year variations, non-food credit flow dipped albeit a little more than usual in the first quarter of 2016-17 before posting a sharp recovery in the next quarter – a contrast to its customary behaviour."
Noting that non-food credit flows had already begun receding early in the financial year, the report states, "A declining momentum got entrenched in the aftermath of demonetisation" of November 2016.

And though it recovered somewhat by the fourth quarter of 2016-17, it just reflected the "usual year-end window dressing", the report says, "During 2017-18 (up to June 23, 2017), the non-food credit growth remained lower at 6.7 per cent when compared with the growth of 9.3 per cent in the corresponding period of the previous year."

Comments

Plastic burning in homes threatens food, water and air across Global South: Study

By Jag Jivan In a groundbreaking study spanning 26 countries across the Global South , researchers have uncovered the widespread and concerning practice of households burning plastic waste as a fuel for cooking, heating, and other domestic needs. The research, published in Nature Communications , reveals that this hazardous method of managing both waste and energy poverty is driven by systemic failures in municipal services and the unaffordability of clean alternatives, posing severe risks to human health and the environment.

Economic superpower’s social failure? Inequality, malnutrition and crisis of India's democracy

By Vikas Meshram India may be celebrated as one of the world’s fastest-growing economies, but a closer look at who benefits from that growth tells a starkly different story. The recently released World Inequality Report 2026 lays bare a country sharply divided by wealth, privilege and power. According to the report, nearly 65 percent of India’s total wealth is owned by the richest 10 percent of its population, while the bottom half of the country controls barely 6.4 percent. The top one percent—around 14 million people—holds more than 40 percent, the highest concentration since 1961. Meanwhile, the female labour force participation rate is a dismal 15.7 percent.

The greatest threat to our food system: The aggressive push for GM crops

By Bharat Dogra Thanks to the courageous resistance of several leading scientists who continue to speak the truth despite increasing pressures from the powerful GM crop and GM food lobby , the many-sided and in some contexts irreversible environmental and health impacts of GM foods and crops, as well as the highly disruptive effects of this technology on farmers, are widely known today.

Swami Vivekananda's views on caste and sexuality were 'painfully' regressive

By Bhaskar Sur* Swami Vivekananda now belongs more to the modern Hindu mythology than reality. It makes a daunting job to discover the real human being who knew unemployment, humiliation of losing a teaching job for 'incompetence', longed in vain for the bliss of a happy conjugal life only to suffer the consequent frustration.

Stands 'exposed': Cavalier attitude towards rushed construction of Char Dham project

By Bharat Dogra* The nation heaved a big sigh of relief when the 41 workers trapped in the under-construction Silkyara-Barkot tunnel (Uttarkashi district of Uttarakhand) were finally rescued on November 28 after a 17-day rescue effort. All those involved in the rescue effort deserve a big thanks of the entire country. The government deserves appreciation for providing all-round support.

'Restructuring' Sahitya Akademi: Is the ‘Gujarat model’ reaching Delhi?

By Prakash N. Shah* A fortnight and a few days have slipped past that grim event. It was as if the wedding preparations were complete and the groom’s face was about to be unveiled behind the ceremonial tinsel. At 3 PM on December 18, a press conference was poised to announce the Sahitya Akademi Awards .

The war on junk food: Why India must adopt global warning labels

By Jag Jivan The global health landscape is witnessing a decisive shift toward aggressive regulation of the food industry, a movement highlighted by two significant policy developments shared by Dr. Arun Gupta of the Nutrition Advocacy for Public Interest (NAPi).

The illusion of nuclear abundance: Why NTPC’s expansion demands public scrutiny

By Shankar Sharma* The recent news that NTPC is scouting 30 potential sites across India for a massive nuclear power expansion should be a wake-up call for every citizen. While the state-owned utility frames this as a bold stride toward a 100,000 MW nuclear capacity by 2047, a cold look at India’s nuclear saga over the last few decades suggests this ambition may be more illusory than achievable. More importantly, it carries implications that could fundamentally alter the safety, environment, and economic health of our communities.

Madhav Gadgil: The ecologist who taught India to listen to nature

By Raj Kumar Sinha* Among the exceptional individuals who laid the intellectual and scientific foundations of environmental conservation in India—and challenged the dominant development discourse—Professor Madhav Dhondo Keshav Gadgil stands as a towering figure. He was not only a pioneering ecologist, but also among the first to view environmental protection through the lens of democracy, local communities and social justice.

Search This Blog