Begin typing your search above and press return to search.
proflie-avatar
Login
exit_to_app
The smouldering of anger in Ladakh
access_time 29 March 2024 4:20 AM GMT
Democracy that banks on the electorate
access_time 28 March 2024 5:34 AM GMT
Lessons to learn from Moscow terror attack
access_time 27 March 2024 6:10 AM GMT
Gaza
access_time 26 March 2024 4:34 AM GMT
The poison is not in words, but inside
access_time 25 March 2024 5:42 AM GMT
DEEP READ
Schools breeding hatred
access_time 14 Sep 2023 10:37 AM GMT
Ukraine
access_time 16 Aug 2023 5:46 AM GMT
Ramadan: Its essence and lessons
access_time 13 March 2024 9:24 AM GMT
When ‘Jai Sree Ram’ becomes a death call
access_time 15 Feb 2024 9:54 AM GMT
exit_to_app
Homechevron_rightBusinesschevron_rightGoldman Sachs says...

Goldman Sachs says present economic crisis bigger than that of 2008

text_fields
bookmark_border
cancel
camera_alt""

Mumbai:  The consumption slump, a major challenge afflicting the economy, cannot be attributed to the NBFC crisis as it predates the first default by infra lender IL&FS, says a brokerage, which has also slashed growth forecast to 6 percent with a downward bias.

Many people attribute the deepening slowdown in consumption to the NBFC crisis that began in September 2018 when IL&FS went belly up following which consumption financing--a forte of shadow banks, stopped with a chill in disbursements by these players.

According to Prachi Mishra, the chief economist at Wall Street brokerage Goldman Sachs, her analysis indicates that consumption has been falling since January 2018, which is much before the end August 2018 default by IL&FS which triggered the liquidity crisis for NBFCs.

She said the fall in consumption is responsible for a third of the overall dip in overall growth, with the global slowdown coupled with funding constraints.

"There is a slowdown and the growth numbers have fallen by 2 percentage points," Mishra said, speaking at an event by The Economist.

However, she expects growth to tick up in the second half, courtesy the easy money policy of the RBI which has slashed the key policy rates by a record five times or by 135 bps to a decadal low of 5.15 percent since February and also the push to sentiment from the growth enhancing measures like the recent massive tax giveaways to corporates.

Mishra said investments and exports have been sliding for a long time, but it is the steep consumption slump which has is the new pain area.

"The present slowdown is protracted and has lasted for over 20 months now," Mishra said, adding this is different from the growth headwinds like demonetisation or even the 2008 financial crisis, which were temporary in nature.

The comments come amid growth slowing down to a six- year low of 5 percent in the June quarter, which has been followed by a rash of downward revision in growth estimates to the tune of 70-110 bps, including by the RBI which now expects the economy to expand by 6.1 percent and also by multilateral agencies like IMF and the World Bank.

Research by the brokerage points out that 40 percent of the pain is coming from the slump in global trade, over 30 percent from consumption slowdown and the rest is due to the severe funding constraints.

Addressing the same event, Srei Infra Finance chairman Hemant Kanoria said there is a need for the economy not to be "messed" around for political gains.

Kanoria said his company has cut down on disbursements and chosen to focus on holding on to liquidity for the rainy day, which has resulted in a sharp 30 percent dip in new construction equipment hiring.

Highlighting that this is a broader trend among the shadow banks, Mishra said NBFCs' credit growth has dipped to 13-14 percent now as against a growth of 24 percent till the recent past and blamed it on the slowing demand for loans, the increased regulatory pressures and a risk aversion.

NBFCs are show shy of lending that they are preferring to invest in government bonds rather than making loans, she said, adding this aspect needs to be broken.

Show Full Article
News Summary - Goldman Sachs says present economic crisis bigger than that of 2008
Next Story