And today, India is in the midst of a sweet credit cycle. India’s banks are lending money quite freely. Credit growth is soaring at its highest level in over a decade — it’s growing at over 15% year-on-year. (View Highlight)
All the sectors are knocking on the doors of banks for money. It shows that people and companies feel confident to borrow money to create wealth-generating assets for the future. People trust that the economy will do better. (View Highlight)
GDP is driven primarily by 3 factors.
There’s consumption expenditure which is the biggest driver. This is when you and I buy and use goods and services in the economy. And it makes up nearly 70% of the GDP.
Then there’s government expenditure. The folks in power build roads, bridges, and other infrastructure. This generates employment and money flows within the economy.
Finally, there’s private capital expenditure. This is when India Inc or the corporates decide to set up new manufacturing units to cater to increasing demand (View Highlight)
So when there’s an uptick in corporate loans, it could tell you something about economic growth, especially considering corporates haven’t been investing all that much in the past few years into new factories and plants. (View Highlight)
companies look to build more capacity when their existing capacity is being utilized to a certain point — typically the average is around 80%. So when they find that they’re having to use 80–90% of capacity, they feel confident about building out more manufacturing. And when Kotak Mahindra Bank asked its big and small corporate customers about their capacity utilization, it found that 70% had hit their peak. (View Highlight)
consumer confidence is headed higher. When the RBI conducted a survey in December, it found more optimism among the people with regard to employment prospects and the economy. Also, people’s outlook on discretionary spending (things like cars and TVs) has moved into the positive zone for the first time since the pandemic began. (View Highlight)
