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Worsening India Default Risks Are Putting Focus on Stimulus

Rahul Satija
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Worsening India Default Risks Are Putting Focus on Stimulus

(Bloomberg) -- Investors are awaiting stimulus measures from the Indian government as a gloomy economic outlook adds to mounting credit market woes and raises fears defaults will spread.

The government is planning measures to boost the economy and may announce some steps this week to help demand for housing, automobiles, and to spur small businesses, an official said on Friday. Credit profiles of the nation’s companies worsened to a 19-month low in July, according to a Care Ratings index that tracks 1,601 local firms.

The credit market has been stung by a yearlong shadow banking crisis that started with shock defaults last year by IL&FS group. Government measures to kick-start the economy may help investors regain confidence after other missed payments by firms including non-bank financier Dewan Housing Finance Corp., travel planner Cox & Kings Ltd. and wind-turbine maker Suzlon Energy Ltd.

India’s central bank cut its benchmark interest rate last week for the fourth time in 2019. Reserve Bank of India also lowered its economic growth forecast for the year to March 31 to 6.9% from its 7% forecast in June.

Read more about the unconventional rate cut opening Pandora’s box for India watchers

“The problem in the economy is lack of demand, which can’t be addressed by RBI’s rate cuts,” said Madan Sabnavis, chief economist at Care Ratings. “Quality of debt in the country has definitely gone down. Indian companies will remain under pressure in the coming months,” if further measures are not taken, he said.

(Adds tout on unconventional rate cut.)

To contact the reporter on this story: Rahul Satija in Mumbai at rsatija1@bloomberg.net

To contact the editors responsible for this story: Andrew Monahan at amonahan@bloomberg.net, Anto Antony

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