The change in credit growth to change in nominal GDP growth has remained steady in the last 12 years, with the average multiple of 1.05, according to a Bank of Baroda economic research report on credit and economic growth in India.
The analysis has been done for the period between FY12 and FY24 across different variables and this has been divided into 2-phases of 5 or 6 years each, with the average multiple for both phase-1 and phase-2 standing at 1.0 and 1.1, respectively.
Jahnavi Prabhakar, Economist, BoB, observed that this simply implies that if the nominal GDP of the country in FY25 is expected to grow by 10.5 per cent as per the Union Budget, the credit growth for the same period is likely to expand by at least 11.55 per cent (1.1*10.5 per cent).
She noted that the credit disbursals across sectors in the span of last 12 years has remained resilient.
“India’s economy has been growing at a steady pace compared to its global counterparts. In more than a decade (last 12 years), the economy has registered a strong and steady growth of 5.9 per cent even as it witnessed a global health emergency such as Covid-19 pandemic. If this period is excluded, growth scales up further to 6.6 per cent driven by structural reform measures and prudent fiscal management coupled with political stability,” the BoB Economist said.
Notably, in the last 12 years, the average nominal GDP growth stood at 11.1 per cent and the scheduled commercial bank’s credit growth at 11.7 per cent.