Industrial rebound calls for credit–Economic Times–16.04.2018

The Index of Industrial Production has notched a credible 7.1% increase in February (over the like period last year); output has been buoyant for four consecutive months now, which bodes well for the overall growth momentum.

It is imperative to nurture the recovery, by creating an atmosphere in which banks keep lending, instead of freezing operations for fear of inviting eager-beaver law enforcers.

The latest numbers show that the index for manufacturing has risen an upbeat 8.7%, and that the output of capital goods, which suggests investment demand in the pipeline, has surged 20%. Other indicators also corroborate recovery.

Notice that commercial vehicle sales have posted a record 24.6% rise in March. Besides, year-on-year non-food bank credit has gone up by a handsome 9.8% in February, against a lacklustre 3.3% increase in credit offtake in the same period last year.

However, disaggregated figures also show that bank credit to industry increased by a mere 1% during the month, which seems quite an improvement given that credit offtake in the sector actually contracted 5.2% in the like period last year. It is still nothing to write home about.

Further, credit offtake, while having picked up in sub-sectors like textiles, engineering goods and chemical products, has declined for infrastructure, metals and cement.

The way forward is to proactively move ahead with bankruptcy resolution of stressed assets in key segments like steel and cement, while taking the bull by the horns in the power sector by asking people to pay for the power they consume.

The latest industrial index points to some zing in consumption demand, with rosy growth in both consumer durables and non-durables. The economy needs requisite credit delivery and an active bond market to sustain the momentum.

This piece appeared as an editorial opinion in the print edition of The Economic Times.
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