Analyzing the Disconnect Between Industrial Credit and GDP Growth in India (FY17-FY19)
This data-driven analysis highlights a puzzling divergence between industrial credit growth and industrial GDP (GVA-ASI) between 2016-17 and 2018-19. Historically, these two metrics moved in tandem. However, during this period, industrial credit slowed significantly while GVA-ASI showed an unexpected upturn. This decoupling suggests that industrial GDP might have been overestimated in the current National Accounts Statistics (NAS) series. The share of industrial credit in total bank credit has also declined from 42% in 2013 to 23% in 2024, with credit shifting toward the services sector and personal loans.
Key Points
- The share of industrial credit in total bank credit has reached its lowest point in half a century.
- Credit growth in the western, southern, and northern regions was lower than the national average, while central and northeastern regions saw higher growth.
- The correlation between industrial credit and GVA-ASI dropped significantly in the pre-pandemic window (2016-2020).
- The decline in industrial credit growth has been a decade-long trend, with growth rates falling from double digits to around 4.1%.
- The divergence provides some credence to the claim that industrial GDP is overestimated in the current NAS series.
Exam Facts
- Industrial credit share fell from 42% (2013) to 23% (2024).
- Compound annual growth rate (CAGR) of industrial credit was 4.1% between 2014-24.
- The current NAS series uses 2011-12 as the base year.
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