Credit growth plunges in key infra sectors: RBI data

Bank credit to the infrastructure sector, which had been steadily sliding over the first eight months of the current financial year, has recorded its sharpest contraction of 6.7 per cent in November.

Written by Sandeep Singh | Updated: January 12, 2017 8:27 am
RBI, reserve Bank Of India, BAnk notes, RBI bank notes, RBI monetary policy, demonetisation, demonetisation effects, RBI demonetisation, Urjit Patel, urjit Patel demonetisation, india news, indian express columns Reserve Bank of India (Source: File)

A spending push in key infrastructure sectors, such as roads and railways, may be at the heart of the Centre’s efforts to rekindle the economy but attempts to prod the private sector to invest in core sectors seem to be floundering — if lending by banks is anything to go by.

Bank credit to the infrastructure sector, which had been steadily sliding over the first eight months of the current financial year, has recorded its sharpest contraction of 6.7 per cent in November.

The latest data released by RBI Tuesday shows that credit outstanding to the infrastructure sector has slipped from Rs 9,64,800 crore in March 2016 to Rs 9,00,700 crore in November 2016.

The power sector, which accounted for almost 55 per cent of the infra credit demand, saw a contraction of 10.4 per cent in November — down from a decline of 4.8 per cent in April 2016.

And, the road sector, which has seen significant government push, has witnessed a sharp decline in credit offtake over the last few months.

In October and November, bank credit slipped to a low of 2.9 and 1.3 per cent, respectively, suggesting a decline in private sector demand for credit and a corresponding aversion by banks in lending to the sector.

The decline in infrastructure credit growth has also pulled down the overall bank credit to the industry as it contracted by 3.4 per cent in November, which is the worst in at least a decade. Even the gross bank credit expanded by only 4 per cent in November, down from 9 per cent growth in March 2016.

Recent data on highway construction show that the pace of construction has not picked up.

graph-page-1In December, Minister of State in the Ministry of Road Transport and Highways, Mansukh L Mandaviya, informed Rajya Sabha that in the first seven months of FY’17, the length of highway construction stood at 3,591 km against the target of 15,000 km. In 2015-16, the length of highway construction stood at 6,029 km.

Among several reasons cited by Mandaviya for the slow pace were land acquisition, utility shifting, non-availability of soil/aggregates, poor performance of contractors, etc.

In his budget speech 2016-17, Finance Minister Arun Jaitley had announced a total outlay of Rs 97,000 crore for the road sector.

However, private sector involvement seems to be very low. In the first eight months of the FY’17, the banks credit outstanding for the road sector rose by only Rs 2,700 crore from Rs 1,77,500 crore in March 2016 to touch Rs 1,80,200 crore in November 2016.

Economists say the environment for private sector investment is “very weak” as of now and may remain out of the system for some time.

“While government investment is one factor to crowd in private sector investment, there are other factors also required and they are not favourable as of now. There is too much debt in the books of infrastructure companies and also, a lot of companies are saddled with overcapacity. Even the banks are not very keen on lending to the sector as they have a lot of bad loans in the sector,” said DK Joshi, chief economist, Crisil.

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  1. B
    Bharat vasai
    Jan 12, 2017 at 4:53 am
    Except for bhagwati every economist of any worth has condemmed demonatisation as a stupid idea. Modi has proven to be dumber than Rahul. But you dumb bhakts are dumber than modi to know that. But i suspect you are who is happy india has been destro by modi.
    Reply
    1. B
      Bharat vasai
      Jan 12, 2017 at 4:37 am
      He is sarcastic bro
      Reply
      1. B
        Bharat vasai
        Jan 12, 2017 at 4:36 am
        How much money do s pay to RSS/BJP to destroy India.lt;br/gt;lt;br/gt;For 70 years RSS/BJP opposed Indias interest, they opposed lt;br/gt;lt;br/gt;Consution lt;br/gt;Equal rights for dalits lt;br/gt;Equal rights for women lt;br/gt;Computers in 80slt;br/gt;Pro development reforms in 90s lt;br/gt;Gstlt;br/gt;FDI lt;br/gt;Nuclear Deal lt;br/gt;Land Bill lt;br/gt;Aadharlt;br/gt;MNREGA lt;br/gt;And numerous such things.lt;br/gt;lt;br/gt;If it wasn't for Congress, and we had listened to RSS/BJPs ideas, we would have been like stan.lt;br/gt;lt;br/gt;As for scams, lets not forget Vyapam scam where 60 people have been killed. Or modis KG Basin scam for 10,000 crores.lt;br/gt;lt;br/gt;Corrupt Modi war on corruption is like Dawood war on drugs. lt;br/gt;lt;br/gt;But indians have to pay for mistake of letting RSS terrorists seizing power and deploying state machinery and propaa teams to fool Indians like they do in north korea.lt;br/gt;lt;br/gt;lt;br/gt;lt;br/gt;.
        Reply
        1. B
          Bharat vasai
          Jan 12, 2017 at 4:41 am
          If modi was serious about combating corruption and black money he would have lt;br/gt;lt;br/gt;1. Implemented lokpallt;br/gt;2. Brought political parties under RTIlt;br/gt;lt;br/gt;BEFORE disrupting lives of 100 crore Indians and MURDERING 100 .lt;br/gt;lt;br/gt;corrupt Modis (KG basin scam 10,000 crore, Sahara birla bribes) war on black money is as credible as Dawood speaking about war on drugs.lt;br/gt;lt;br/gt;Indians are trusting but we are not that stupid.
          Reply
          1. N
            Nana
            Jan 12, 2017 at 5:19 am
            You are a net gainer because of demonetization.
            Reply
            1. M
              Marco
              Jan 12, 2017 at 4:12 am
              Today it is Credit. Tomorrow it will be country which will Plunge into Anarchy if Modi is not removed from power as soon as possible.
              Reply
              1. J
                jay
                Jan 12, 2017 at 1:42 am
                It takes sometime for some sectors to come out of COMA. They were happily working with Black Money, Tax evasion for last 70 years. Their books need to be clean now and hence new learning is needed.
                Reply
                1. S
                  SubbuI
                  Jan 12, 2017 at 6:58 am
                  THIS NALAYAK NMODI CRIME MINISTER BJP GOVERNMENT IS FAILING IN ALL FRONTS AND ALL PROMISES IT MADE AND IN ALL BUDGET ESTIMATES. TO COVER UP THE FAILURE IN ITS ECONOMIC AND INFRASTRUCTURE IMPROVEMENT FAILURE THIS DICTAR IMPOSED DEMONETISATION ON 130 CRORES POOR INDIANS ( LEES 2% HIS FREINDS). WHICH MADE PEOPLE SUFFER TO NO END AND 124 INDIANS WERE KILLED BY THIS CRIMINAL DESPCESION, GDP GROWTH LOWERED UPTO 1.5% RESULTING 2 Lack CRORE LOSS. THIS MAN MUST BE IMPEACHED AND REMOVED FROM PM POST BEFORE MORE FURTHER HEAVY DAMAGES
                  Reply
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