Rural India can't recover until NBFCs do

An intricate web of links between rural incomes, construction activity and shadow banks are fuelling the economic slowdown

India’s economy has hit the brakes hard with growth falling to 5 per cent, from 8 per cent a year ago, and impacting everything from consumption to construction. But how did this slowdown occur so quickly and become so pervasive? We believe much of the blame lies in the strong links between sectors that at first glance can appear largely unrelated. 

Our analysis shows that India's ongoing rural distress has been worsened by the slump in the construction sector which in turn has been driven by the serious problems in the shadow banking system that’s made up of non-bank financial companies