Millennium Post

A compounding difficulty

A compounding difficulty

As the slowdown story throws up graver aspects of the worsening situation, Reserve Bank of India data reveal that fund flows to commercial sector down by about 88 per cent owing to falling credit offtake from banks due to aversion to risk and weak demand. This sharp decline in the overall financial flows to the commercial sector is the status in the first six months of the current financial year amid the larger slump in the economy. The latest RBI data confirm that the flow of funds from banks and non-banks to the commercial sector has been Rs 90,995 crore in 2019-20 so far (April to mid-September) as against Rs 7,36,087 crore in the same period last year. The commercial sector categorically excludes farming, manufacturing, and transportation. With the financial sector in doldrums, there was a reverse flow of Rs 1,25,600 crore from the commercial sector to non-deposit-taking NBFCs and deposit-taking NBFCs as against a flow of Rs 41,200 crore in the same period last year. In addition to that, non-food credit flow from banks to the commercial sector also declined from Rs 1,65,187 crore to a reverse flow of Rs 93,688 crore to the banks. Net issuance of commercial papers (CPs) subscribed by non-banks fell from Rs 2,53,669 crore to Rs 19,118 crore by mid-September 2019. This situation points to a dismal pace of trade that has been having an impact on the major sector. The RBI had cut the real gross domestic product (GDP) growth for 2019-20 to 6.1 per cent from 6.9 per cent in forecast in August, reflecting the ongoing slowdown in the economy. The gravity of the situation could be gauged by the fact that timely access to funding remains a challenge for many barring those that are backed by strong parents even one year after the funding availability issues emerged for non-banks.

Analysts maintain that the overall growth is expected to remain subdued in fiscal 2020. Growth is the driver of favourable statistics which reflect the health of an economy. The need of the hour is certainly to engage in serious deliberations for retrieving the economy from the shambles it has been slipping into; but as a matter of more immediate measure, substantial relief needs to be devised, not those with apparent long-term impacts but those with short-term effects.

Editorial

Editorial

Our contributor helps bringing the latest updates to you


Share it
Top