Bank credit to Industry grows by 45 per cent

New Delhi, Apr 9: The industry has absorbed maximum non-food bank credit, which went up by 45 per cent for the April-September period 2005-06, with real estate, housing and trade, forming a bulk of the cash liquidity, an ASSOCHAM Eco Pulse (AEP) study said.

Real estate, housing, construction and trade are among a host of sectors, which absorbed the maximum of the liquidity accounting for the biggest growth in the deployment of the non-food bank credit in 2005-06.

Vehicles and vehicle parts, infrastructure, petroleum and coal products, iron and steel, gems and Jewellery are other sectors which deployed maximum of the non-food bank credit.

As the Reserve Bank of India is addressing the issue of the liquidity crunch, the Associated Chambers of Commerce and Industry (ASSOCHAM) is of the view that the industry, which is thick in the virtuous cycle of increased demand and investment, should continue to get the bank finance at attractive interest rates.

''We are encouraged by Finance Minister P Chidambaram's call to the banks to continue funding the growing sectors of the economy, including agriculture'', ASSOCHAM President Anil K Agarwal said.

The bank credit to industry has gone up to Rs 49,023 crore in April-September 2005-06, from Rs 26,738 crore in the corresponding period last year, due to automobiles, infrastructure, construction, petroleum, gems&Jewellery and iron&steel.

The automobile industry is growing at a steady annual growth rate of 15 per cent in the last four years. The industry had an estimated investment of nearly Rs 50,000 crore in 2002-03, which is expected to go up to Rs 80,000 crore by 2007.

Exports of automobiles, as a proportion of total production, have increased from 2.9 per cent in 1999-2000 to 8.9 per cent in 2005-06, which in turn led the credit disbursal in the vehicles industry, going up by 33.4 per cent in 2005 as against a meager 4.9 per cent in 2004.

There has been considerable progress in the last ten years in attracting private investment into the infrastructure sectors, first in telecom, then in ports and roads, and in individual projects in other sectors.

The estimated requirement for total investment is Rs 1,72,000 crore in the National Highways Sector by 2012, Rs 40,000 crore for airports by 2010 and Rs 50,000 crore for ports by 2012.

The key indicators of the construction sector, like cement and finished steel, registered growth rates of 8.15 per cent and 7.4 per cent respectively during April-October of 2005-06, in order to cater to the consumption demand which was 8.8 per cent higher than the previous year, thereby leading to a rise of 32.1 per cent in the credit deployment as against 28.7 per cent.

India imports about 75 per cent of its requirement of crude petroleum. The unprecedented sharp and spiraling increase in international oil prices from late 2003, led to a sharp increase of 32 per cent in the bank credit, in the fiscal 2005 as against 28.8 per cent in the year 2004.

Gems and Jewellery recorded buoyant exports in 2004-05. Overall exports were up by 23.9 per cent to 6.29 billion dollars in 2005-06 from 5.08 billion dollars in the corresponding period of the previous year.

The sustained buoyancy in the exports of gems and Jewellery led to a remarkable increase of 25 per cent in the credit deployment during the period April-September 2005.

Credit to the housing sector continued to remain strong. Credit to this sector sharply increased from meager Rs 75, 173 crore in March 2005 to Rs 1, 53,267 crore in October 2005, registering an exact increase of 10.83 times.

Real Estate Development has emerged as a principal growth engine for economic development in the country. Alongwith housing, the trend in Real Estate also was that of an upsurge. The year-on-year growth in the credit to the sector increased from 47.7 per cent in April-October 2004-05 to 51.5 per cent in April-October 2005-06.

As a result of robust growth of the Indian economy, the demand for bank credit has exhibited a sharp acceleration in the fiscal 2005-06. As on February 17, 2006, the year-on-year non-food credit extended by SCBs grew by 33.6 per cent on top of 26.6 per cent growth in the corresponding period of the previous year, thereby imposing greater pressure on liquidity.

UNI