The lag effect of investment may explain shrinking factory output, low demand in Q4

Corporate credit offtake increased significantly in the financial year ended March 31, 2019 compared to the previous year, going by data available with major banks. Yet, the situation on the ground has not showed a commensurate change. On the contrary, factory output has contracted and early fourth quarter results of India Inc do not suggest an increase in the demand for goods or services. State Bank of India (SBI) recorded a 14.83 per cent increase in corporate credit growth in FY19 compared to 2.18 per cent the previous fiscal. Advances rose to Rs. 8,51,638 crore (Rs.7,41,668 crore). SBI has been stepping up corporate lending in the recent past, setting up an exclusive corporate advances group and a corporate clients group to address the needs of different categories. As per the strategy outlined in the analyst presentation for the year on Friday, post its fourth quarter results, SBI plans to reach out to new segments look for product penetration across high priority relationships. ICICI Bank, too, said that it witnessed ‘continued’ growth in its domestic corporate loan portfolio at 14 per cent year-on-year (YoY). The data of many public sector banks also reveals a similar picture.

Not just of individual players, even the RBI’s data on industry-wise deployment of bank credit presents an encouraging picture. While total credit to industry inched up 6.9 per cent, the highest Y-o-Y increase was under the broad category of ‘infrastructure lending’ at 18.5 per cent. Within this, credit to telecommunications was up 36 per cent. Chemicals and chemical products, engineering, and cement and cement products were the other categories that showed increased bank credit off take.