Wholesale credit to grow at 9-11% in FY23-30 period: CRISIL report

9% of infrastructure, industrial capex is for green projects and number is rising, says agency

Wholesale credit for infrastructure and companies' capital expenditure is expected to grow at 9-11 per cent CAGR in the FY23-30 period as investments pick up in the country, said CRISIL Ratings on Thursday.

This credit growth will be a substantial improvement compared to the pace of six per cent in the FY15-22 period. Infrastructure’s share is likely to grow marginally in wholesale credit, with thrust on investments for green energy. With a banking credit-to-gross domestic product (GDP) ratio of 51 per cent, India has high potential for credit growth in both the retail and wholesale verticals. The retail sector led the overall credit growth for banks over the past three-four fiscals.

Credit growth in the wholesale sector was muted in the past 6-8 financial years, but will improve due to the central government’s focus on infrastructure. The push will also come from the private sector’s capex revival in conventional sectors as well as new-age sectors through the PLI scheme.

Within wholesale, the share of infrastructure is likely to grow marginally this decade. Credit growth in the power sector is expected to continue, led by new capacities in green investments and transitional capacities for shift from conventional power.

“India’s medium-term growth prospects are healthier. What is also good to see is the increasing sustainability footprint of capex,” said Amish Mehta, Managing Director and CEO of CRISIL.

Nearly 9 per cent of the infrastructure and industrial capex is for green projects. This number is seen rising to 15 per cent by fiscal 2027. Down the road, the impact of climate risk mitigation will be felt across revenue, commodity prices, export markets and capital spending, Mehta said.

Alongside banks, non-banks and the domestic bond market would remain the key sources of funding for green investments. Market borrowings and non-bank financiers to drive green financing India aims to source half of its energy needs from non-fossil fuel sources by 2030. This entails large investments in infrastructure such as grid, battery storage and hydrogen. The capital-intensive nature and longer gestation period of such projects present financing challenges.

Green investments of Rs 29 trillion are projected over fiscal 2023-30, mostly in the power sector. It would around four times greater than the Rs 6.7 trillion estimated for fiscal 2015-22.

These investments will encompass various areas, including development of the power grid and distribution network, installation of smart metering systems, and establishment of transport and hydrogen infrastructure.