Corona devastates economy

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With the economic condition of India going down every passing day, it has become the prerogative of the government to come with a revival plan. Bank credit deployment in the economy has been one of the key measures for the economic revival of India ever since the outbreak of COVID-19 and the announcement of general lockdown on March 24, 2020, but the level of deployment is still lower than one year before when the country was completely shut. The current level of deployment of bank credit is completely not sufficient for the economic revival in the future. The report on sectoral deployment of bank credit collected from 33 scheduled commercial banks and released by the Reserve Bank of India (RBI) clearly shows that on a year-on-year basis, non-food bank credit growth was at 5.9 percent in May 2021 compared to 6.1 percent in May 2020. This shows that the current unlocks being announced in various states have somehow failed to improve the economic position of the country.
The deployment of bank credit suffered even more in almost all sectors of the economy during the second wave of the pandemic. And now with the third wave already knocking at the door, both creditor banks and debtor companies, as well as individuals, are overwhelmingly apprehensive. So far, all measures to revive the ailing Indian economy have drastically failed, and unless a special drive for credit deployment is restarted, India may altogether miss the opportunity of reviving the economy. On the plus point, agriculture and allied activities have been performing well at an accelerated growth of 10.3 percent in May 2021. However, in comparison to March this year to May, it showed a negative growth of -1.2 percent. Size-wise, credit to medium industries registered a robust growth of 45.8 percent in May 2021. However, credit to large industries contracted by 1.7 percent in May 2021 as compared to a growth of 2.8 percent a year ago. This contraction continued during March-May 2021 at 1.3 percent. With the rising prices and stagnant income during the pandemic times in the country, the spending capacity of an average spender has been curtailed.
Credit growth to the services sector decelerated to 1.9 percent in May 2021 from 10.3 percent in May 2020. The situation worsened during March-May 2021 and the credit deployment in this sector turned negative at -2.3 percent. Having said this, the credit-to-trade segment continued to perform well, registering an accelerated growth of 12.4 percent in May 2021. Personal loans too registered a growth of 12.4 percent in May 2021. At such a level of credit flow, crises of demand and supply, cannot be successfully addressed, because neither a necessary level of employment could be generated, nor a sufficient amount of money be put into the hands of people, which in turn slow the progress in the revival of the economy. Therefore, the government must come up with initiatives that look at empowering the spender as well as opening up the broader market. Only then may the Indian economy come back to its tracks and head for a brighter future. Until and unless a robust strategy guaranteeing income flow to the spenders’ hand is achieved, the economy doesn’t seem to be in a position to revive itself.

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