RBI economic data: Experts decode the fresh signs of slowdown

Consumer confidence index in June according to the RBI survey was 95, which fell to 89 in September. This is again scary since the index has not fallen to 89 in the last 6 years.

However, the most worrying data is the credit to the commercial sector. Credit to the commercial sector from the bank space, also known as non-food credit, in April-September period last year was Rs 1.85 lakh crore. This year, it is at Rs 1.28 lakh crore.

The non-bank credit sector in 2018 April-September was thriving and it gave credit of Rs 5.51 lakh crore. In 2019, it has given Rs 2.19 lakh crore. So, the entire credit to the commercial sector was Rs 7.36 lakh crore in April-September 2018. In 2019, it is just Rs 90,000 crore.

CNBC-TV18 spoke to Research Director and Senior Fellow at IDFC Institute Niranjan Rajadhyaksha, independent economist Renu Kohli, Chief Economist at Aditya Birla Group Ajit Ranade and London School of Economics professor Maitreesh Ghatak to get their views on the economic situation.

"Obviously there is a problem here. I think the collapse in credit to the commercial sector is definitely a cause for worry. If you actually break it up to see what is going wrong, you will see that credit to agriculture and consumer credit are more or less on track. What has really happened is that credit to industry has tapered off sharply and credit to the service sector has also fallen. We know that industrial growth is low but I also suspect that there has been some inventory de-stocking which has happened in this financial year which has affected the credit numbers. As far as services go, I am again assuming that a large part of it is explained by the real estate sector," Rajadhyaksha said.

According to Ranade, even though the actual impact may be a little less than what the numbers show, which is very alarming, this kind of credit numbers do not support robust GDP growth.

Kohli pointed out that the country is facing a major demand problem. "Certainly, it seems that there is a huge demand side problem which is not explained just by a collapse in nominal GDP. The collapse in nominal GDP has been actually very sharp, it is a little more than 4 percentage points but still that doesn't explain why it should be distributed all across, all segments," she opined.

In Ghatak's view, historical comparisons are tricky as environments and policies change often. "I do not think we really should be moving beyond the kind of discussion about supply side versus demand side factors because this is a demand contraction. So, various supply side measures will be important, but on the other hand, to push the economy out of the slump that it is in, we would need some kind of expansionary policy that has direct income generating effects," he said.