ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Articles By Isha Gupta

Effects of Demonetisation on Deployment of Credit

An unusual feature observed in the post-demonetisation period is the striking shift in the lending patterns of scheduled commercial banks, where growth in credit to industry decelerated considerably, while personal loans rose sharply over this period. This article analyses the organisation-wise and occupation-wise trends in the deployment of total outstanding credit during March 2014–March 2020.

India’s Household Leverage and the COVID-19 Crisis

The outbreak of the COVID-19 crisis has deepened the recession in the Indian economy and caused a significant leap in household financial savings given their cutbacks in consumption and reduced demand for credit amid rising income uncertainties. Banks have also tightened lending due to asset quality concerns. This shift in household financial behaviour was caused by the continuous amplification of household leverage in the pre-COVID-19 years, resulting from a sharp increase in household financial liabilities on account of the robust growth in personal loans. As demonetisation created surplus liquidity in the banking system, it brought about a persistent build-up of unsecured household debt. This paper analyses trends in credit deployment across different sectors of the economy to illustrate the rising share of household credit concentrated in credit card receivables and other personal loans post demonetisation.

Dynamic Multiplier Effects of Foreign Remittances

India continues to be the largest recipient of remittances across the world, with a tremendous growth in private unrequited transfers from just ₹12 billion in 1990–91 to about ₹1,009 billion in 2015–16. Emphasising this component of remittances that India has witnessed during the post-liberalisation period, the article investigates the demand-side macroeconomic effects of the flow of private transfers on key variables such as consumption, investment, imports, and income in India during the post-reform period of 1996–2014.

India’s Faltering Demand Conditions

Various assessments highlight the “robust” signs of revival and resilience shown by the Indian economy since the second half of 2017–18. Citing the near-term data, these not only undermine the demand-side instability that the economy has been witnessing since the past few years, but also underestimate the role of domestic demand as India’s primary engine of growth, unique amongst the major emerging economies. The assessement of the major components of aggregate demand and analyses of the growth rates of different sectors during the last few years reveal some interesting specifics for an economy that is yet to gain full momentum.