The consumption slump, a major challenge afflicting the economy, cannot be attributed to the NBFC crisis as it predates the first default by infra lender IL&FS, says a brokerage, which has also slashed growth forecast to 6 percent with a downward bias.
Many people attribute the deepening slowdown in consumption to the NBFC crisis that began in September 2018 when IL&FS went belly up following which consumption financing — a forte of shadow banks, stopped with a chill in disbursements by these players.
According to Prachi Mishra, the chief economist at Wall Street brokerage Goldman Sachs, her analysis indicates that consumption has been falling since January 2018, which is much before the end August 2018 default by IL&FS which triggered the liquidity crisis for NBFCs.
She said the fall in consumption is responsible for a third of the overall dip in overall growth, with the global slowdown coupled with funding constraints. “There is a slowdown and the growth numbers have fallen by 2 percentage points,” Mishra said, speaking at an event by The Economist.