India Consumption Story Is A Worrying Tell-Tale Of Economy

Blame it on fear of losing jobs or real loss of family income, personal spending habits are witnessing an over-cautious trend with drop in credit card outstandings, lesser borrowing for durables for ACs/refrigerators or even depending less on bank advances for education.

All these trends are visible in the RBI data for April to July this financial year. Take for instance credit card outstandings. There has been a 6.2 per cent drop from April to July in FY'21, though year-on-year the aggregate outstandings show an increase of 7.9 per cent. The Covid impact is visible in the first four months between April and July.

Most of the sub-segments of the personal loans are typically a middle class urban and semi-urban phenomenon. Though they are less affected by locking and unlocking than the poor , working in the informal sectors - like the migrant labourers, it is the middle class which has been driving the great India consumption story That story is a worrying 'Tell-tale', for now!

Fear of the unknown is driving people to preserve their Fixed Deposits in banks. Unlike in the past, they are not willing to go and borrow from banks ,against their FD Receipts. There is a huge drop of 21.6 per cent in such borrowings between April and July, as per RBI data.

Education loans throw rather confusing and worrying signals. While the segment has witnessed a degrowth of one per cent between April to July this fiscal, the year -on-year outstandings have shown a greater degree of decline of 3.8 per cent. Does it mean, the demand for such loans had dropped before the outbreak of the pandemic; but with loss of income, parents are visiting banks for meeting the vital expenses of their children?

Interestingly, advances to individuals against shares and bonds have seen a huge growth of near 20 per cent from April onward to July, this fiscal. The increasing valuation of the shares held by individuals may have encouraged banks to lend liberally against such securities.

One only hopes that the market does not fall on its head, sending the lenders into a tizzy. In a jargonized world of banking, it is called 'Mark To Market’, which means the value of the security lying with the banks goes on fluctuating with the Sensex, along with the heart beats of the bank managers.