<p>The slowdown in consumption in India started with Prime Minister Narendra Modi's demonetisation drive, the data available with the Reserve Bank of India (RBI) reveals.</p>.<p>The central bank's data shows that the gross bank exposure towards consumer goods loans has seen a steep and constant decline in the aftermath of the abrupt note ban in late 2016.</p>.<p>At the end of March 2017, the gross bank exposure to the consumer goods loans stood at a record Rs 20,791 crore, before which it had witnessed a constant growth for the past six years. Post-demonetisation, the numbers started to head southwards -- it has dipped by 73% till now to a mere Rs 5,623 crore. In fiscal 2017-18, the number dipped by 5.2%, in 2018-19 the number dipped by an astounding 68%. The fall in the loans to the consumer durables has continued to this year, dipping 10.7% year-to-date.</p>.<p>Experts attribute the phenomenon to the fact that post-demonetisation, earnings, especially in the micro, small and medium enterprises (MSMEs) have come down.</p>.<p>"Basically, it works through the income route, so there were two factors that seem to have impacted the dip in Bank's exposure to consumer durables post-demonetisation -- one is that the MSMEs had serious problems in terms of cash crunch, employees' departure which eventually led to their shutdown, and second is inventory pile-up, as people did not have cash to buy, along with increased unemployment and loss of income in the same year," said Govind Rao, member, 14th Finance Commission. <br /><br />He further said that the government cannot be held accountable as it does not conduct any surveys on MSMEs, which leads to a lack of empirical evidence.</p>.<p><strong>Secular decline</strong></p>.<p>In another indication of the slowdown, the exposure of bank loan across industries has come down by 3% year-to-date (YTD), services by 4.3%. The worst-hit has been the exposure to the shipping industry, which has seen a dip of 24.1% YTD. However, household loans have grown by 2.5%, mainly on the back of a 3.4% jump in housing loans.</p>
<p>The slowdown in consumption in India started with Prime Minister Narendra Modi's demonetisation drive, the data available with the Reserve Bank of India (RBI) reveals.</p>.<p>The central bank's data shows that the gross bank exposure towards consumer goods loans has seen a steep and constant decline in the aftermath of the abrupt note ban in late 2016.</p>.<p>At the end of March 2017, the gross bank exposure to the consumer goods loans stood at a record Rs 20,791 crore, before which it had witnessed a constant growth for the past six years. Post-demonetisation, the numbers started to head southwards -- it has dipped by 73% till now to a mere Rs 5,623 crore. In fiscal 2017-18, the number dipped by 5.2%, in 2018-19 the number dipped by an astounding 68%. The fall in the loans to the consumer durables has continued to this year, dipping 10.7% year-to-date.</p>.<p>Experts attribute the phenomenon to the fact that post-demonetisation, earnings, especially in the micro, small and medium enterprises (MSMEs) have come down.</p>.<p>"Basically, it works through the income route, so there were two factors that seem to have impacted the dip in Bank's exposure to consumer durables post-demonetisation -- one is that the MSMEs had serious problems in terms of cash crunch, employees' departure which eventually led to their shutdown, and second is inventory pile-up, as people did not have cash to buy, along with increased unemployment and loss of income in the same year," said Govind Rao, member, 14th Finance Commission. <br /><br />He further said that the government cannot be held accountable as it does not conduct any surveys on MSMEs, which leads to a lack of empirical evidence.</p>.<p><strong>Secular decline</strong></p>.<p>In another indication of the slowdown, the exposure of bank loan across industries has come down by 3% year-to-date (YTD), services by 4.3%. The worst-hit has been the exposure to the shipping industry, which has seen a dip of 24.1% YTD. However, household loans have grown by 2.5%, mainly on the back of a 3.4% jump in housing loans.</p>