Expect credit growth to be in 17-18% range going forward: SS Mundra, Union Bank of India

In an interview with ET Now, SS Mundra, ED, Union Bank of India, talks about the latest IIP numbers. Excerpts:

ET Now: Industrial credit offtake is weak, but we have seen it range between 15% and 20% over the last few months. What is the outlook going ahead? Do you worry that the off take could possibly get worse?

SS Mundra: I would like to mention a couple of points before I answer your question. I do not think it makes much of a difference if the number is 0.1, 0.3 or 0.5, as there is clearly a weakening. As far as I remember -- barring January 2012, where there was a significant revision of the IIP data -- in subsequent months the IIP data has been holding well.

Coming back to your question, capital goods is something that cannot be looked as just one data point. Capital goods are spilling over to the consumption manufacturing sector or growing to the infra sector. And, as a lay person, not an economist, I believe that it will be meaningful to look at where the capital good is getting added.

On the consumption side, capacity creation is on hold and people are in a wait-and-watch mode. As far as infra is concerned, it will be very misleading to link the sanctions today to the capital goods utilisation. This is because infra projects that are sanctioned as of today will take two to three years to reach the stage when capital goods addition will be required. The activity we are seeing right now is not because of new projects, but because of projects that have been in the pipeline for a while.

That being said, I believe that post October -- in the festival season -- there will be an uptick in capital goods creation, and the whole indices should show a much better outcome than what we are seeing today going forward.

ET Now: A quick word on what the outlook in terms of credit off take is for the remainder of this year?

SS Mundra: Credit offtake had not been very strong for the first half of the year, but it is still around 16% YoY for the industry, which is more or less in line with RBI’s projections. Going forward, I expect the credit growth for the year to be in the range of 17% to 18%.