(1/n) It turns out year-on-year credit growth is -ve in real terms. (Real) Outstanding credit in Aug-20 is 9.23% lower compared to Aug-19 & 9.47% lower compared to Aug-18. Now one can argue tht 2018 is not an appropriate benchmark since this was the year of debt fuelled growth.
(2/n) If u buy this argument then relevant benchmark is probably FY17/16. The picture improves considerably. But note that total credit in Aug-20 is still 2.57% lower than wat it was in Aug-17. There is still more to the story: distance frm pre-crisis trend is likely much bigger.
(3/n) But there r few positives as well. First, total credit (real terms) to export sector has continued to increase over this period. It stood 14.92% higher in Aug-20 than what it was in Aug-18. This confirms that the economy has rebalanced towards exports during last two years.
(4/n) Second, the trend decline in (real) credit growth had reversed in Jan-20 improving from -10.63% in Jan-20 to -3.57% in April-20. Then COVID struck and things changed for worse again. Now there has been some improvement over last one month but too early to call it a victory.
(n/n) Another passing remark worth makin is that (real) credit growth stood btw 10-15% durin most of FY18. The debt binge led to the crisis we saw. But, having said tht, we r still far from normality. Even as macro numbers change for good, the crisis is still not over for masses.
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