Even though we do not have a precise quantitative estimate of the impact on growth, the main concern is that the higher capital requirements under Basel III will kick in at a time when credit demand in the economy will be on the rise. 30. In a structurally transforming economy with rapid upward mobility, credit demand will expand faster than GDP for several reasons.
First, India will shift increasingly from services to manufactures, and the credit intensity of manufacturing is higher per unit of GDP than that for services. Second, we need to at least double our investment in infrastructure which will place enormous demands on credit.