| While many fear that the recent hike in interest rates will kill consumer demand (for home finance as well as other consumer goods), and that will affect economic growth, credit rating firm ICRA discounts this. In its latest issue of Money & Finance, ICRA argues that in 2002/2003, the recovery was facilitated by the increase in consumer finance, when the share of incremental credit to this sector rose from 14 per cent to 31 per cent, and later to 52 per cent (in 2004). This situation has, however, now moderated and it is industrial/infrastructure demand that matters more "" in 2004-05, a year in which bank credit grew at almost twice the rate it did in the previous two years, this sector accounted for over 40 per cent of incremental credit in the year. While interest rates obviously do matter for investments, these are driven more by expectations. In the current year, ICRA projects, demand for consumer finance will probably slow, but it is not unduly worried about it. |
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