Economy

As default risks rise, investors eye stimulus to prop up economy

Bloomberg Mumbai | Updated on August 13, 2019 Published on August 13, 2019

Investors are awaiting stimulus measures from the government as a gloomy economic outlook adds to mounting credit market woes and raises fears defaults will spread.

The government is planning measures to boost the economy and may announce some steps this week to help demand for housing, automobiles, and to spur small businesses, an official said on Friday. Credit profiles of the companies worsened to a 19-month low in July, according to a Care Ratings index that tracks 1,601 local firms.

The credit market has been stung by a year-long shadow banking crisis that started with shock defaults last year by IL&FS group. Government measures to kick-start the economy may help investors regain confidence after other missed payments by firms including non-bank financier Dewan Housing Finance Corp., travel planner Cox & Kings Ltd. and wind-turbine maker Suzlon Energy Ltd.

India’s central bank cut its benchmark interest rate last week for the fourth time in 2019. Reserve Bank of India also lowered its economic growth forecast for the year to March 31 to 6.9 per cent from its 7 per cent forecast in June.

Read more: Suzlon offers to repay ₹8,500 cr to settle stressed debt

The problem in the economy is lack of demand, which cant be addressed by RBIs rate cuts, said Madan Sabnavis, chief economist at Care Ratings. Quality of debt in the country has definitely gone down. Indian companies will remain under pressure in the coming months, if further measures are not taken, he said.

Published on August 13, 2019
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