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Consumers preponing loan decisions in view of future rate hikes

Consumers in India are preponing loan decisions in view of future rate hikes. The RBI governor, Dr Shaktikanta Das has already hinted that the MPC, wen it meets on 06-08 June, will be going for second round of rate hike.

Consumers preponing loan decisions in view of future rate hikes
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Mumbai: Consumers in India are preponing loan decisions in view of future rate hikes. The RBI governor, Dr Shaktikanta Das has already hinted that the MPC, wen it meets on 06-08 June, will be going for second round of rate hike.

Personal loans segment continued to perform well, registering acceleration in growth to 14.7 per cent in April and contributes around 90 per cent of the incremental credit during the month, primarily driven by 'housing', 'vehicle loans' and 'Other personal loans' segments. Customers, especially in retail verticals could be having a feel of future run expected in interest rates, and might be front loading their purchases in days to come giving a fillip to consumer demands in select niche areas, says an internal economic research findings of SBI.

Those looking for impeccable imprints of degrowth in GDP numbers released on Tuesday, courtesy the persistent inflationary pressure and recalcitrant Omicron variant shadowing activities of last quarter for a sizeable part would do well to remember the state of economy as reflected through latest numbers are a just fraction of the possibilities that could have been had the adversity not gripped us with barely a shorter interval just when things looked emerging from the brutal second wave.

The omicron fuelled days brought the bleak memories from last year. Spike in case loads in select developed economies scared the psyche, the scars of past coming to the fore. Businesses, caught unaware previously and braving essential commodity as well as specialised essentials like Chips shortages (and the ripple effect it had) kept the expectations short. Against that backdrop, the GDP numbers do not disappoint much and in fact inspires the market!

India's economy grew by 8.7 per cent in FY22 as against the NSO's earlier estimate of 8.9 per cent. There was almost minimal data revision in Q1, Q2 and Q3 of FY22. For FY22, real GDP has been revised downwards by Rs 360 billion to Rs 147 trillion as per the first advanced estimate released in early February, of which Rs 270 billion alone is in Q4. Quarterly GDP growth for Q1, per cent Q2 and Q3 have also been revised downwards modestly. The GDP growth for Q1 was revised downwards by 25 bps to 20.1 per cent.

During Q4, apart from manufacturing, all other sectors showed positive growth. Manufacturing declined by 0.2 per cents indicating the slight impact of Omicron variant induced lockdowns. Construction also showed tepid growth of 2.0 per cent. The sequential seasonally adjusted GDP growth is lower than the non-seasonally adjusted GDP growth for Q4 over the past. In FY22 Q4, real GDP growth is 6.7 per cent qoq, however the seasonally adjusted real GDP growth is only 0.71 per cent, showing only a modest improvement over the past quarter and loss of growth momentum.

'Trade, hotels, transport, communication and services related to broadcasting' is the only sector which is still not out of woods. The FY22 absolute numbers (on constant prices) of this sector are still 10.3 per cent lower than the pre-pandemic level (i.e. FY20). It is still Rs 3.04 lakh crore less than the FY20 levels.

"We believe that by Q1 FY23 this sector will reach/cross the pre-pandemic level. On expenditure side, both the private and Government final consumption expenditure crossed the pre-pandemic level by Rs 1.2 lakh crore and 0.93 lakh crore, respectively," says Soumya Kanti Ghosh, SBI group's chief economic advisor.

On expenditure side, while private final consumption expenditure grew by 7.9 per cent in FY22 as compared to contraction in FY21, the Government final consumption expenditure decelerated to 2.6 per cent in FY22 as against 3.6 per cent growth in FY21. However, if we look at the Q4 growth in PFCE, it has revealed a much lower growth rate at 1.8 per cent, and it shows a continuous decline onwards from Q1FY22. Gross fixed capital formation grew by whopping 15.8 per cent in FY22. Both valuables and exports exhibited double-digit growth.

The gap between the nominal GDP growth and the real GDP growth has increased between Q2 FY20 and Q1 FY22 owing to higher inflation. It moderated in Q2 and Q3 FY22 but increased modestly in the last quarter of FY22. The growth in deflator has increased modestly to 10.4 per cent yoy in Q4 FY22 compared to 9.8 per cent in the previous two quarters.

The provisional data of ASCBs for the fortnight ending 06 May indicates that Rs 1.5 lakh crore growth in credit and Rs 2.30 lakh crore growth in deposits has happened during the current Financial Year. Interestingly, this is the first time in the last 5 years that during the first 3-fortnights Credit growth has remained positive, which has usually remained negative in first few fortnights.

The sector-wise data for April Indicate that credit off-take has happened in almost all sectors.

The World Economic Outlook (WEO) has cut its global growth forecast for 2022 relative to its January projection by 0.8 percentage points to 3.6 per cent. China's economy remained deep in a slump in May as lockdowns continued to weigh on activity. The downward revision is sharper for emerging market and developing economies than for advanced economies.

Kumud Das
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