In Graphic Detail: Bank credit to industry rises, a lure for private capex

Loans to industry as a percentage of nominal gross domestic product have dropped sharply over the past seven years, an indication that India’s businesses didn’t really contribute much to economic growth.

The story of private sector capex usually starts with the state giving it a push and then the financiers chasing big companies with loans to add the final shove. The government’s capex mill is running faster, as we highlighted in an earlier edition.

Also Read: In Graphic Detail | How government's capex got a boost in recent years 

Now the financiers have also begun to add their weight to coax the private sector to spend on capital and begin setting up factories and fresh capacities. As the chart above shows, bank credit to the industry has shown an impressive revival over the past one year and seems to be holding its own in contributing to the recent surge in credit growth. From being an abysmal 3.4 percent year-on-year growth in November 2021, loan offtake to industry has quickened to 13.07 percent by November last year. While retail loans may still be growing at a faster pace than the overall loans of the banking sector, lending to industry is beginning to hold its own. The fact that a large part of the growth has come from lending towards large companies is another reason for cheer.