First thought this morning
Thousands of farmers from various states gathered in New Delhi
last week. Many of these farmers had come from faraway places like Telangana,
Tamil Nadu, and Maharashtra etc. Every farmer in the crowd had a compelling
story to tell. These stories mostly revolved around two primary themes: (a)
Farming has become an unviable business for marginal and landless farmers (who
incidentally account for over 50% of the total population in the country); and
(b) The government schemes for welfare of these farmers are either
ill-conceived or poorly implemented.
A simple five minutes courtesy chat with any of the farmers was
adequate to suggest that we are nowhere close to achieving the ambitious
targets of inclusion set by the government.
One of the major positive outcomes of this protest march, in my
view, was that university students, who are mostly disconnected from the
realities of the rural economy, came out in large numbers and earnestly tried
to understand the farmers' issues. This will surely go a long way, as these
students will eventually become the policy makers tomorrow.
Secondly, though most opposition parties tried to hijack the
highlight from farmers' issue to further their vested interests, the
participant farmers brilliantly maintained the peace and decorum. This is
unprecedented, very unlike the farmers' protests we have seen in the past,
e.g., by BKU etc.
Though the farmers carried red flags with communist symbols,
none of them appeared to be politically motivated. Attempts by a section of
politicians and their supporters to trivialize their protests as mere ploy to
affect the ongoing elections is unfortunate and deplorable.
Chart of the day
Bank Credit vs. Govt Priorities
The recently issued data for sectoral deployment of bank credit
has thrown some very interesting points. I find the following points worth
noting and pondering over.
The credit profile of banks does not match the government
priorities
(a) The total bank
credit has grown at the rate of 8.8% during the five year period from October
2013 to October 2018. However, during this period:
(i) Credit to
industry has grown at just 2.7% CAGR. Loans to medium scale industries have
decelerated at the rate of (-)4% CAGR, while loans to micro and small
enterprises have grown at just 3.6% CAGR.
As proportion of gross bank credit, the loans outstanding to
micro and small enterprises have fallen to 4.5% in October 2018 as compared to
5.8% in October 2013.
For medium enterprises, the decline is even worse, from 2.4% in
2013 to just 1.3% in 2018.
(ii) Credit
outstanding to tourism sector (a focus area) has not grown at all in past five
years. As a proportion of gross bank credit, it has fallen to 0.5% in 2018 from
0.7% in 2013.
(iii) Credit to
shipping has also declined at the rate of (-)7% CAGR in the 5year period ended
October 2018.
(iv) Credit to NBFCs
has grown @14%CAGR during past 5years. As a proportion of gross bank credit it
hs grown to 7% in 2018, from 5.5% in 2013.
(v) Personal loans
have grown @16% CAGR in 5yr period ended October 2018. These loans now stand at
25.3% of gross bank credit vs. 18.4% five year ago.
Out of personal loans credit card outstanding have recorded
maximum growth at 28.9%CAGR in past five years. These now stand at 1% of gross
bank credit vs. 0.4% in 2013.
This read with the growth of disbursement to NBFCs, may make the
picture even more interesting.
Education loans have grown @3.5%CAGR, and now less than 1% of
the gross bank credit.
(vi) Priority sector
credit has grown at the rate of 9.3%CAGR in past five years. But lending to
industry in this segment has grown just @3.6%CAGR.
Priority sector housing credit has recorded lower growth @6.7%CAGR.
Whereas overall housing loans have grown @15.8%CAGR.
(vii) Loans to
agriculture & allied activities have registered a higher growth of
11.3%CAGR during five year period ended October 2018.
Overall credit to this sector now stands at 13.2% of the gross bank
credit, against 11.7% five years ago. This is despite many episodes of loan
waivers.
