India’s central bank slows growth in unsecured loans and credit card debt
The Reserve Bank of India’s (RBI’s) efforts to slow the rapid growth in the value of unsecured retail credit, loans without collateral, and credit card debt have paid dividends, with April’s data showing a slowdown in the sector.
The RBI data showed outstanding credit card debt rose 23% year-on-year in April 2024, down from 31% a year ago. And sequential growth in April 2024 over March 2024 was 1.6%, compared with 3% in April 2023 over March 2023.
Growth in the other retail loans category, which predominantly covers unsecured credit, nosedived to 17.1% year-on-year in April 2024, from 25.7% a year ago.
Sequentially, it was down 0.3% in April 2024 over March 2024, compared with 1.6% in April 2023 over March 2023.
In November 2023, the RBI had increased risk weightings on certain loan categories of unsecured credit by 25% to signal to lenders to moderate the pace of high growth.
The RBI in a statement said growth in retail loans moderated to 17.4% year-on-year in April 2024, compared with 19.4% a year ago.
Credit growth to agriculture and allied activities grew to 19.7% in April 2024, from 16.8% in April 2024.
Credit to industry grew 6.9% year-on-year in April 2024, compared with 7.2% in April 2023.
Credit growth to the services sector was higher at 19.2 in April 2024, although that was down from 21.3% a year ago, supported by improved credit growth to commercial real estate and professional services.
GDP grows by 7.8% in last quarter
India’s gross domestic product (GDP) grew by 7.8% in the quarter ending March 31, 2024, according to new data from the National Statistical Office (NSO) of Ministry of Statistics and Programme Implementation (MoSPI).
These figures are above the Reserve Bank of India’s (RBI) estimate of 7%, according to projections made in its April monetary policy review.
GDP growth provisionally stands at 8.2% for the full financial year 2023-24 (FY24), compared with the growth rate of 7% in FY23. Earlier, government estimates had placed GDP growth for FY24 at 7.6%.
Meanwhile, Real Gross Value Added (GVA) has been estimated to grow by 6.3% in Q4FY24. “This GVA growth has been mainly due to significant growth of 9.9% in manufacturing sector in 2023-24 over a contraction of 2.2% in 2022-23,” the government said in a press release.
For the entire financial year 2023-24, GVA has grown by 7.2%, compared with a growth rate of 6.7% in FY23.
During the Monetary Policy Committee (MPC) meeting in April, the RBI kept its prediction for GDP growth in FY25 unchanged at 7%. The central bank had previously set a GDP growth target of 7.1%.
RBI Governor Shaktikanta Das said that the global economic situation appeared resilient and global trade was expected to grow. Das said that “despite inflation slowly moving closer to targets around the world, the last mile of tackling inflation was proving to be difficult”.
Das further warned that the worsening debt situation in a few advanced economies may spill over to India as well.
India’s Finance Minister Nirmala Sitharaman said “the remarkable GDP growth rate” is the highest among the major economies of the world. She said, “It is worthwhile to note that the manufacturing sector witnessed a significant growth of 9.9% in 2023-24. Many high-frequency indicators indicate that the Indian economy continues to remain resilient and buoyant despite global challenges.”
Central bank governor Das also announced that India’s foreign exchange reserves had hit an all-time high at $645.6 billion, as of March 29.
And data released by the Ministry of Commerce & Industry showed that the combined index of eight core industries (ICI) recorded a provisional growth of 6.2% in April 2024 compared with April 2023. The ministry said the positive trend reflects increases in the production of key industries including electricity, natural gas, coal, steel, refinery products, crude oil and cement.
