Indian companies have been witnessing an improvement in credit profiles as low interest rates since 2020 lowered cost of funds and improved profitability. But that has changed since. In the past year, interest rates have soared and inflation has eaten into profit margins.
ICRA, which estimates Q2 GDP growth at 7 per cent topping the Monetary Policy Committee's forecast of 6.5 per cent, said growth may slow down in the second half of the financial year ahead of the elections as the impact of slowing capex and tempering of demand because of monetary tightening shows through in full.
According to economists from India Ratings, there is a disconnect between the headline and underlying consumption data, with a clear K-shaped demand making it unlikely that the current overall trend will continue for long
With the Reserve Bank of India (RBI) mandating banks to maintain an incremental CRR of 110% of net demand and time liabilities NDTL, and the resulting squeeze on liquidity, CD issues once again increased. Moreover, deposit growth at 13.2 percent is still lagging the credit growth, which was 14.2 percent as of end August. Deposits rose at a rapid space only when the Rs 2,000 notes were recalled. But they started slowing again after the majority of such notes was returned to banks.
Fruit prices in India, which contributed to 0.3% of food inflation in FY23, are set to increase this year. The late arrival of monsoon and heavy rains have impacted crop production, leading to higher prices. Apples, which account for a quarter of fruit consumption in India, were 15% more expensive in August than in May. Fruit inflation is expected to rise in the latter half of the year, despite a high base effect expected to keep inflation low.