RISK AVERSE INDIAN GROWTH RATE
India no more following the Hindu growth rate in the present volatile global scenario has been a debatable issue over the last two years. Changing the GDP methodology from factor to market based price, has spurted our GDP making it one of the best performing Emerging Markets. Economists and analysts have made their observations quite vocal at regular intervals, so the recent US government report hasn’t come as a shocker neither for the government nor for the Indian masses. But what is of a major concern are the facts which have come to light in the recent Financial Stability Report.
Both credit and deposit growth rates of SCBs have not only remained in single digits but have declined. Credit growth rate has declined to 8.8% in March 2016 from 9.40% in September 2015. Deposit rate at 8.1% in March 2016, fell by around 180 basis points over the same period. As per Bloomberg report, syndicated loans of about $ 8.6 bn were signed by Indian borrowers, which is 44% lower in the second quarter than the previous three months. Corporate sector is on severe diet control due to over-gorging on easy stimulus available by Indian banks at the time of 2008 crises. So right now de-leveraging is the sole mantra for the Indian corporate and thus stimulating private investment or expansion is a farfetched goal both for the Indian government and banking industry. Small and medium enterprises have been the major martyrs facing double edged sword of a slowing economy and stringent bank credit regulations. As a result leverage or DER of small and medium companies has gone up.
Big companies and established industrial houses are busy giving endorsement to new government initiatives and policies, but when it comes to implementation, purse strings don’t loosen up and excess cash gets invested in mutual funds, bank deposits, government bonds and other financial assets bloating ‘other income’ of these companies year after year. Do we have poor risk taking ability? Everything insured and assured makes sense to us either by central or state government or some big industrial house. May be our general mentality is to play safe till the global tidal current settles down. We have already lost decades waiting for liberalization and now that we have reforms on daily basis we should not be looking at the FED or ECB or BOJ. What we need today is not just ease of doing business but easing ourselves mentally to take on the world as it comes. I had recently read somewhere, “There are two main dangers in life, risking too much and risking too little”. And we Indians risk too little.