Most measures of capacity utilisation, unemployment and underemployment are much more like what we saw after the slowdown in 2001, than what we saw after the recession in the early 1990s. This is not a problem. In fact, it is good. It is a goal of macroeconomic policy to try to keep the economy not too far from full employment.
Here, absolute volumes are still rising, having more than doubled between June 2005 and June 2010, from Rs 102 billion to Rs 217 billion. But the rate of overall credit growth has also been decimated in this period, from an annual 26% to only 8%. All this gives us cause for serious concern. Are our banks perhaps becoming too riskaverse?