Real picture of Indian economy may be visible only after September

Source :Sify
Author :Sify
Last Updated: Tue, Jun 30th, 2020, 11:36:35hrs
India Economy

Mumbai: An unlocked India, recovering markets, and labourers heading back to cities may not be the signs of a recovery if this latest report from State Bank of India is to be believed.

Markets that had tanked in the wake of coronavirus are recovering despite India Inc failing to provide sizzling fourth quarter results.

In response to the recent market gains despite negative reports on contraction of GDP, economists at SBI securities said "beautiful markets do not signify a beautiful economy."

The economists warn that banks may start reporting higher non-performing assets by September. They attribute it to the end of the six-month moratorium on loan repayments.

The note by the economists also reveals that deposits in bank accounts were slowly increasing than the borrowings. A huge population depends on interest earned from bank deposits to sustain themselves.

The note also observed that transactions made on credit and debit cards have declined signalling that customers may abstain themselves from investing in luxury items.

Per card transactions have made a dramatic decline from Rs 12,000 to Rs 3,600 in the case of credit cards and Rs 1,000 to Rs 350 in the case of debit cards, the economists explained.

The dip in transactions is representative of restrictive spending a consumer behaviour trend that has surprised economists. Should this behaviour sustain in the long run, sales of several product categories may get hit.

The note also observed that people have started pledging gold to borrow money from banks which could increase the secured loans for banks.

The economists also made two key inferences. First, India cannot depend on farm sector to pull itself from the recession-like situation. That, because even if the farm sector provided the best output of 15.6 percent (as it did in 1951-52), the total GDP growth would be a a meagre 0.2%.

Second, SBI economists also pitched in for a second fiscal support. Previously, the Modi government released Rs 20 lakh crores as part of a reform package. "We must think of a second round of fiscal support at least for the beleaguered sectors," read the SBI note.