For an economy that is in want of some good news, here's something that at least sounds positive. A cross-country comparison of Asian economies reveals that India's credit offtake to the private sector is growing the fastest, even faster than - hold your breath - mighty China.
In a recent decadal comparison between India and China that Firstpost had recently written about, the rising gap in global economic influence came across as overwhelming, as China races ahead of slower moving India.But on the domestic front, it seems that Indian private borrowers are unfazed by interest rate hikes in the economy. Or at least they were in January 2011, when Indian credit offtake overtook China's, according to the International Monetary Fund's latest 'Regional Economic Outlook' for Asia and the Pacific.
India's private sector credit growth till January 2011 was 29%, higher than China's by over 6 percentage points (see table) and much above other Asian economies like Malaysia, Singapore, Thailand, Indonesia and Hongkong as well.
(Credit growth is measured over the quarter, where the actual numbers are three-month moving averages, probably a data smoothening technique commonly used by analysts to see larger trends and remove seasonality in data to an extent.)
The gap looks set to widen as India's credit growth picked up further steam during February to over 33%, maintaining its lead over other Asian countries. However, comparable data for the Chinese economy are not available.
All this appetite for credit is good to the extent it spurs growth, but the downside of easy money is inflation. Maybe we have been running a lax monetary policy, and too much money sloshing about in the economy has contributed its mite to making inflation worse.
The figures to watch will be those in the coming quarters, with the Reserve Bank now slamming the brakes by raising interest rates by 50 basis points (100 basis points make 1%) in May.
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Updated Date: Dec 20, 2014 03:52:14 IST