n the era of AI-pilled, aspirational young consumers, expensive tastes are not constrained by thin wallets. Arshanapally Shiva, a fledgling script writer in Hyderabad, apparently knows this all too well. Charmed by the features of iPhone 17, he exercised the option to borrow and pay-as-you-earn to bankroll his new asset acquisition worth nearly a lakh of rupees. Shiva is not alone. Individual borrowing, especially for consumer goods and auto has been an important driver pushing the overall retail lending. Many data-tracking pundits could therefore resonate with analyst reports on credit growth trends. Like the findings in the latest ICICI Securities report: “Credit growth remained buoyant at over 19 per cent year-on-year, with improvement across segments.”
An industry veteran who gets consulted by several policy-makers, tells this writer, without wanting to be named: “There is a perceptible growth in retail credit and for project lending directed at major infrastructure (roads, metros, airports, power and railways) apart from lending to the capital-guzzling semiconductor projects.”
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Mind the gap & miles to go
This, he feels, augurs well because the parameters here are half that of the global benchmarks on credit growth. Take consumer credit as a percentage of GDP, it is only 40 per cent in India while it over 60 per cent in China and 70 per cent in European countries. Insurance penetration in India is just about 3 per cent while the global average is 8 per cent. In asset management, it is half the global average. In mortgages, India is at around 14 per cent of GDP while countries like China, Singapore, Malaysia and Thailand it is much more than 14 per cent. In Sweden and Denmark going up to as much as 80 per cent and 90 per cent. Therefore, the runway for growth in these segments is still huge in India. Aspirations, after all, do not seem to need money if there is access to loans and ready takers like Shiva.
In infrastructure, it is mainly roads, airports, metros, railways, semiconductors and on solar with measures to strengthen the grid, these are where huge sums are being poured in. Interrogate the internet and the story on solar power gets compelling. The solar power capacity addition doubled in the last one year to nearly 45 GW taking the total to over 170 GW, which is huge when compared to just around 3 GW a little over a decade ago.
There is a confluence of factors at play driving credit growth from rising consumer demand, surging auto sales with monthly average sales between 4 and 4.5 lakh units, GST collections touching new highs (the last recorded number of October being at around Rs 2.3 lakh crore), banks profitable with record low NPAs to surge in industrial credit for select major infrastructure ventures and capital guzzling semiconductor projects. Given the low credit penetration compared to global averages, pundits point to still a huge runway for credit growth.
On the Industrial credit offtake, there are three to four major semiconductor plants under construction. These are typically, the guzzlers of capital apart from several underground subways under construction. Prime minister Narendra Modi recently inaugurated a 23.3 km metro line in Pune that was built as a joint venture project between Siemens and the Tatas.
Why then the despondency?
The India Development Update, released by the World Bank last month (October), while sharing a joyous note on the share of working-age Indians holding a job rising from around 44 to 54 percent, also reminds that close to half a billion working-age adults remained outside employment in 2023, highlighting the scope for further expanding economic opportunities and labour market participation.
Ask those within the industry on what they see as the dampeners and they point to signals in news reports on staff reductions and more importantly, foreigners selling their stake and leaving. The industry is ready with names and the discussions around plans by Whirlpool Corporation, Lafarge, Metro Cash & Carry, Novartis among several others. All in all, around 20 mid-size foreign players are either pruning their stake or offloading their assets.
To top it all, the villain of the peace this time is the El Niño and its fragmented impact across the country, hitting most of the rain-fed regions of middle & South India. While given that there are enough buffer stocks of food grains, there is no challenge to food security. Nonetheless, the 13 per cent deficit rains this time do raise concerns on rural production and the resulting implications for rural economy in select pockets.
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Poverty, the spatial challenge
Latest in the news has been the World Bank data on India’s stellar performance on poverty reduction. Since most do not enjoy living under a rock and enjoy news feeds, would know the much-reported World Bank observation: “Between 2011 and 2023, the share of the population living below the Lower Middle-Income Country line ($4.20/day, 2021 PPP) fell from 57.7 percent to 16.1 percent.” But then, little discussed is the regional concentration of poverty. The report says: “Spatially, India’s poverty reduction story is one of both convergence and concentration…. Poverty has become increasingly concentrated geographically. While living standards improved across most states, households in a contiguous belt stretching from Uttar Pradesh to West Bengal account for about 57 percent of India’s poor population. As a result, further reductions in national poverty will increasingly depend on enabling productive employment in these states.”
Specifically on jobs, the World Bank report while signalling a reason to celebrate the observation that labour market conditions continue to be broadly resilient, with labour force participation and employment rates stable between Q1 FY2026 and Q1 FY2027,” it does observe: “youth unemployment rose from 14.6 to 15.9 percent between the two quarters, particularly among rural young women. Moreover, real earnings remained broadly unchanged with employment growth concentrated in relatively low-productivity activities.”
From Job seekers to job givers
In times of geopolitical tensions and geo-economic responses, the current trends and the way ahead is perhaps captured well in the October monetary policy statement by Reserve Bank of India (RBI) governor Sanjay Malhotra: “Domestic economic activity exhibited resilience amidst global headwinds as evident from real GDP growth of 7.8 per cent in Q1:2026-27. Growth was driven by resilient private consumption and strong investment activity while contribution of net exports also remained positive.” As for jobs, addressing the US-India Economic Forum meeting last year, the RBI governor, a trained engineer from IIT Kanpur, said: “India is fast becoming a nation of job creators rather than job seekers. When I left college, getting a job in a MNC was the preferred choice. None took up the challenge of starting a venture of his own. In recent years, however, a large number of engineering and management graduates are taking to entrepreneurship and start-ups.” Shiva will certainly seem smarter than what his phone can claim to be if he can leverage his entrepreneurial zeal and graduate from product purchase to project financing – a thought he may want to consider this Diwali!
This article was first uploaded on November eight, twenty twenty-six, at nineteen minutes past one in the afternoon.
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