The upcoming two months are the most crucial ones for the Indian economy that’s facing its worst slowdown in six years. This is amidst a debate about whether the downturn is cyclical or structural as the key automobile industry faces headwinds, said State Bank of India chairman Rajnish Kumar.
He reiterated his support for the government’s move to consolidate state-owned banks.
“If we see the automobile sector, today I read Kia Motors reported very good numbers… That sector is going through a lot of churning,” Kumar told ET in an interview ahead of SBI’s annual banking and economics conclave. “There are issues around environment, change in public mindset. We don’t know how much of this is cyclical and how much is structural… but October and November are two very crucial months for the economy.”
The success or otherwise of the festive season, which traditionally accounts for a bulk of consumption, will determine whether Indians feel emboldened enough to resume spending.
India’s growth slumped to a six year low of 5% in the June quarter.
‘Strong Execution Needed’
Monthly automobile sales have collapsed, in some cases as much as 50%, plunging dealerships into losses and triggering job cuts. The government has announced stimulus measures and reforms including a merger of state-run banks aimed at strengthening them and bolstering credit expansion in order to revive growth.
“Suggestion to consolidate PSU banks was given 25 years ago… This had to be done,” said Kumar. “If there is a strong execution team, then any credit slowdown can be taken care of. The biggest issue is IT, human resource and customer integration.”
Finance minister Nirmala Sitharaman said last week that the government would merge 10 state-run lenders to create four mega banks that would help facilitate the flow of credit.