Some green shoots are sprouting in the economy, says RBI chief

Surabhi/K Ram Kumar Mumbai | Updated on December 23, 2019

Shaktikanta Das   -  Prashant Nakwe

But we will wait for two more quarters to see if this momentum sustains, says Shaktikanta Das

Some green shoots of growth are visible in the economy going by the steady increase in the cost of projects sanctioned by banks and financial institutions, and higher investment in fixed assets by India Inc, according to Reserve Bank of India Governor Shaktikanta Das.

Das emphasised that it is important to wait and see whether these green shoots sustain over a period of two quarters or so before the central bank reaches a conclusion. It would be premature to just see a green shoot and reach a conclusion, he said during an exclusive interaction with BusinessLine.

These comments come in the backdrop of the country’s GDP growth sliding to a 26-quarter low of 4.5 per cent in the second quarter and the RBI sharply lowering its growth estimate for FY2020 to 5 per cent from 6.1 per cent earlier.

The RBI Governor, who completed the first year of his three-year term on December 11, buttressed his point on green shoots by citing the example of the cost of projects sanctioned by banks and financial institutions. Das observed that the total cost of projects sanctioned by banks and financial institutions increased from about ₹37,000 crore in the fourth quarter (Q4) of 2018-19 to about ₹46,000 crore in the first quarter (Q1) of 2019-20 and to about ₹80,000 crore in the second quarter (Q2).

“The pick up has largely been due to a few mega projects where the cost of projects are above ₹5,000 crore in areas like metros, airport projects, power sector and gas distribution,” explained the Governor.

Referring to the corporate performance in H1 (April-September) of this year based on the unaudited half yearly financial statements of more than 1,500 manufacturing companies, Das said that when this performance was compared with the previous year, the RBI found that the investment in fixed assets, including capital work-in- progress, during H1 of 2019-20 accounted for 45.6 per cent of the funds available with these corporates.

So, what this means is that corporates deployed 45.6 per cent of the funds at their disposal in fixed assets, including work-in-progress, compared to 18.9 per cent in H1 of last fiscal year. So, there is an increase in fixed assets.

NBFCs’ assets up

When it comes to the assets of non-banking finance companies (NBFCs), non-deposit taking, systemically important NBFCs and deposit-taking NBFCs, the RBI found that their assets grew about 13 per cent year-on-year from ₹28.3-lakh crore to about ₹32-lakh crore between September 2018 and September 2019.

Excluding government-owned NBFCs, there is a 11 per cent growth in their asset size.

“And bank credit to NBFCs has also grown by 26.5 per cent year-on-year during this period.

“Of course, the NBFC sector was getting a lot of funds from market... some of them are able to get but there are others who are not able to get. This is because markets are differentiating between good and not so good NBFCs,” said Das.

Expectations from govt

The Governor underscored that the Government has initiated a number of measures over the last four-five months to revive the economy.

“One would expect more measures coming from the government… some sort of counter-cyclical fiscal measures and continuation of the structural reform agenda which the government has undertaken.”

Published on December 23, 2019

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