Economic growth not where we want it to be: Tata Capital

A turnaround in heavy commercial vehicles sector and the recent growth in housing market and MSME does not reflect economic expansion, according to a top official at Tata Capital.

“Builder finance, we have found, is an area where there is a lot of demand,” Govind Sankaranarayanan, chief operating officer – retail business and housing finance (RBHF) , at Tata Capital told The Hindu in an interview. “Undoubtedly, home loans in the upper end that cost Rs.1.5 crore and more, are not what we would have expected it to be. In the mid- to lower-end, we don’t see that much of a slowdown, there are still people who want to buy homes.” Overall, there is strong growth in loans for the housing sector, he said, either because the builders are having to refinance their properties or because customers want to purchase new properties.

“The commercial vehicles business has seen a turnaround and it seems to be at a point in its cycle where things are looking up,” Mr. Sankaranarayanan added.

“Where we are seeing growth, and which could reflect economic growth ,is in the small business loans and loans against property,” he said. “That is an area where there has been a lot of growth in the last couple of years.”

However, he conceded that this growth could be for reasons other than economic expansion.

“One of the reasons could be that the credit market itself has grown, so more and more lenders are comfortable lending to them. This does not mean that the economy is booming but it means that there are more players in the market to lend.”

“Overall, if you look at the market holistically, it is not self-evident that growth is where we want it to be,” Mr Sankaranarayanan added. “Certainly, the kind of investment activity that we would have liked to see is still not there.”

Some interesting trends are emerging in the Indian market of late, he said.

“Believe it or not, high-end motorcycles are beginning to become very popular,” Mr Sankaranarayanan said. “ Youngsters who can choose between a car and a Harley, choose the Harley!”

The other change taking place is due to the recent growth of e-commerce companies and the networking opportunities they provide.

“It used to be difficult to reach out to small shopkeepers or retail outlets,” Mr Sankaranarayanan said. “The presence of e-commerce ventures has provided a systematic route to reach out to them. You can now get details about their performance from intermediaries and then lend to them.”