3. Credit, Employment, and the Current Account

In this chapter, we bring out the trends in credit until the eve of the COVID crisis. Credit growth has been muted from around 2016, being close to zero or negative for industry reflecting not only the slow down but the problem of non-performing assets (NPA) and high risks both perceived and real in lending to the industrial sectors. Credit growth to the services sector was higher but still below 10% generally and much lower than in the earlier period. In all sectors, credit growth declined sharply from 2019. Since there are significant changes in the labor participation rates, the growth rate in employment when considered presents a dismal picture right from 2016 of little or no growth in urban employment and marginal growth in rural. Goods exports remained nearly stagnant over the period, and services exports grew from 2017 but both fell off from 2019. The current account deficit was low implying a low growth of the economy. The “Tiger Period” from 2003 to 2004 to the Global Financial Crisis (GFC) saw very rapid growth in net portfolio investment and in FDI.