Loan slide takes cheer out of factory; GST, auto surge

The surge in September’s manufacturing figures, GST collection and auto sales may not be signs of economic revival since bank loan growth, which is said to be directly linked to economic activity, reversed the recovery made in June and July.

Experts see loan growth plummeting to a multi-decadal low with households under stress and job losses and salary cuts impacting personal loan segments, which was doing well until now.

Nikkei Manufacturing Purchasing Managers’ Index (PMI) jumped to 56.8 in September while GST collections for August reached Rs 95,480 crore, a 4 rise year-on-year.

On the automobile front, Maruti Suzuki registered 30% year-on-year growth in overall sales, Bajaj Auto recorded its highest ever exports in September. Honda Cars reported a 10% increase in domestic sales. Hyundai saw a 4% increase in total sales.

But the recovery of bank loans reversed in August due to a decline in credit to personal and infrastructure segments. State Bank of India data showed bank credit that increased by Rs 39,200 crore in June and July, declined by Rs 36,000 crore in August. Its group chief economic advisor Soumya Kanti Ghosh suggested that deposit and credit growth during the current ‘Unlock 4’ period witnessed large declines, with the maximum decline in savings bank deposits and bank advances.

Indicating the stress on household balance sheets, the consumer deleverage or their attempt to clear out loans, also declined in August.