Economy

Indian economy ‘weak,’ credit growth bottoming out: BofA

The government expects the GDP to contract 7.7% in financial year 2021 because of the reverses. File   | Photo Credit: V.V. Krishnan

American brokerage BofA Securities said the Indian economy continues to be ‘weak,’ pointing to activity indicators tracked by it.

On the positive side, the brokerage said credit demand is bottoming out and the real lending rates, adjusted for wholesale price inflation, are falling.

It can be noted that there has been a slew of reports lately about a stronger recovery being underway after the jolt caused by the pandemic. The government expects the GDP to contract 7.7% in financial year 2021 because of the reverses.

“The bad news is that the continued drop in our BofA India Activity Indicator reinforces our view that the economy still remains weak,” the brokerage said in a note.

The indicator fell by 0.6% in November on top of the 0.8% decline in October, and 4.6% drop in the September quarter, it said, adding, “this supports our call of GVA (gross value added) contractions of 1% in the December quarter and 6.7% in FY21.”

The credit growth for FY22 will come at 12%, it said. It can be noted that credit growth had been declining for the last few years, in sync with a dip in the overall economic growth which has been on a downward spiral since demonetisation in late 2016 as borrowers went slow on expansion.

The real lending rates adjusted for WPI will be one of the prime reasons for the faster credit growth estimate in financial year 2022, the brokerage said.

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Printable version | Feb 28, 2021 1:22:51 PM | https://www.thehindu.com/business/Economy/indian-economy-weak-credit-growth-bottoming-out-bofa/article33583665.ece

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