India: Credit crunch and growth stress - ANZ

In view of analysts at ANZ, for the Indian economy, the ongoing and widening stress in country’s credit markets from banks to non-bank financial companies (NBFCs) and asset management companies (AMC) is vividly impacting growth.

Key Quotes

“From the experience of other economies which have suffered from financial sector crisis, we had feared such an outcome.”

“Household consumption has become the latest casualty of the credit crunch, as evident from a variety of indicators. With private investment activity and exports already weak, sustaining GDP growth at or above 7% has become challenging. Our latest downward revisions reflect these headwinds.”

“Preventive measures including tighter norms for asset-liability management are critical to avoid the recurrence of problems. There is however, also an immediate need to provide liquidity support to NBFCs and even AMCs to ensure that liquidity constraints do not escalate.”

“We understand that plans to provide liquidity support to NBFCs are being considered. These measures should help in arresting a further worsening in growth momentum.”