Economic growth will be sharp for services, where output lost cannot be recouped, while manufacturing will see deferment of production and demand. Agriculture too may see payment issues, as it relies on cash. We can expect a drop in GDP growth of up to 0.5% for the year, assuming conditions become normal by December end.
There’s a flurry of deposits and in the absence of adequate lending opportunities, banking is moving into GSecs. The liquidity issue has been tackled, but lending will be down as long as manufacturing lacks growth.
In fact, mortgage loans have been the most buoyant, but will slow down now that real estate has plateaued.
It’s a challenge for banks to balance lending with deposits, which will cost at least 4 per cent. We may expect both deposit rates and lending rates to be lowered in course of time.
There’s inconvenience, as most households transact in cash and may explore cashless options with time. Their demand for FMCG, durables, auto will be hit, affecting related sectors.
Gold purchases too are no exception and will slow down. On the whole spending, will be pushed back, which is significant as it had just starting picking up sharply in October just before Diwali.