Credit growth is expected to be better and will move up in the next financial year, on the back of higher growth in gross domestic product (GDP).
“If you do have the economy going back to a six per cent-plus growth rate, the financing needs of a growing economy would get met by the banking system. I see no reason why credit growth will not be somewhere at 16-17 per cent this year and potentially go up to the higher teens as GDP growth picks up,” said Paresh Sukthankar, executive director, HDFC Bank.
As we get into the next financial year, he said, there is every chance that of moving to a growth rate somewhere between six and 6.5 per cent and, potentially thereafter, in March 2015, be closer to seven per cent.
“The delta obviously has to come from a recovery in the investment portion,” said Sukthankar.
There is some willingness to discuss the possibilities of new projects coming up and according to Sukthankar, that is the first sign of a right turn.
Yet, he says, if people are looking at rate cuts to be the main driver of the economic cycle, it might be asking for too much, because the room for rate cuts is probably around 50 basis points for the next year or so. “I do believe that in the next three-five quarters, as the liquidity condition eases and (there are) some policy rate cuts by the Reserve Bank of India as well there is some room for rate cuts,” said Sukthankar.
Economists are also of the view that the growth in the economy is finally bottoming and there are expectations of improvement in 2013. “We see growth picking up gradually going to 6.5 per cent in 2013 and further to 7.2 per cent in 2014,” said Tushar Poddar, managing director and chief India economist of Goldman Sachs, on Wednesday.
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He said GDP will accelerate from 5.4 per cent in 2012 and remain high through 2015-16.
In fact, a few economists expect growth to start recovering in the second half of the financial year itself. “Growth appears to be bottoming out and we estimate it to be a tad better in the second half, compared to the first half. The recent policy activism from the government and a favourable base strengthen this view,” said Sachchidanand Shukla, senior vice-president and economist at Axis Capital, in his report on Wednesday. In the first half, the economy grew 5.4 per cent.