Deposit and credit growth
There is a pick up in credit growth. Is this just a bounce back after the effect of demonenetisation last year. It is difficult to say, but it would well be just a return to normalcy: on a YoY basis credit growth in 2015-16 upto Q3 was10.6% just the same as the 10.7% reported this year after last year's sharp fall; then on financial year so far basis, credit growth in 2015-16 upto Q3 was 6.9% well above this year's 3.3% which recovered from the paltry 0.9% increase last year.
Deposit growth, on the other hand, has decelerated. Is this also a return to normalcy? It does not look like so: on a YoY basis deposit growth in 2015-16 upto Q3 was 10%, but the fall this year to 4% after the jump during the demonetisation year to 15% seems excessive; then on a financial year so far basis, deposit growth in 2015-16 upto Q3 was 7%, which then expectedly rose last year to 12%, but has now fallen to 1%.
It seems that the effects of demonetisation last year and GST this year have affected incomes and profits, and the economy has not fully recovered as yet.
Money Supply and Reserve Money
Since two years ago - the week ending Dec 25, 2015 - aggregate money supply has grown by 17%, well short of the nominal growth of the economy over these two years.This could again suggest that the ecnomy continues to be weak.
Has the RBI erred in not attempting to increase money supply in line with the growth of the economy? Has its sole focus on the key policy rate, the repo rate, been inappropriate at a time of severe disruption in the monetary system and a mammoth structural change in the tax system with the introduction of GST this year? I don't know for sure but there are some questions that need to be investigated and answered.
Reserve Money growth has been anaemic - just 9% of the last two years. The RBI'S stated policy is to grow this parameter in line with the nominal growth of the economy. So, reserve money growth is well short of this target.
Please read last quarter's blog, and my earlier blogs on this subject.
There is a pick up in credit growth. Is this just a bounce back after the effect of demonenetisation last year. It is difficult to say, but it would well be just a return to normalcy: on a YoY basis credit growth in 2015-16 upto Q3 was10.6% just the same as the 10.7% reported this year after last year's sharp fall; then on financial year so far basis, credit growth in 2015-16 upto Q3 was 6.9% well above this year's 3.3% which recovered from the paltry 0.9% increase last year.
Deposit growth, on the other hand, has decelerated. Is this also a return to normalcy? It does not look like so: on a YoY basis deposit growth in 2015-16 upto Q3 was 10%, but the fall this year to 4% after the jump during the demonetisation year to 15% seems excessive; then on a financial year so far basis, deposit growth in 2015-16 upto Q3 was 7%, which then expectedly rose last year to 12%, but has now fallen to 1%.
It seems that the effects of demonetisation last year and GST this year have affected incomes and profits, and the economy has not fully recovered as yet.
Since two years ago - the week ending Dec 25, 2015 - aggregate money supply has grown by 17%, well short of the nominal growth of the economy over these two years.This could again suggest that the ecnomy continues to be weak.
Has the RBI erred in not attempting to increase money supply in line with the growth of the economy? Has its sole focus on the key policy rate, the repo rate, been inappropriate at a time of severe disruption in the monetary system and a mammoth structural change in the tax system with the introduction of GST this year? I don't know for sure but there are some questions that need to be investigated and answered.
Reserve Money growth has been anaemic - just 9% of the last two years. The RBI'S stated policy is to grow this parameter in line with the nominal growth of the economy. So, reserve money growth is well short of this target.
No comments:
Post a Comment