Rural India Is Recovering From the Cash Ban

Monday, July 24, 2017

India’s vast rural hinterland, which makes up 70 percent of the South Asian country’s population, is showing signs of recovery from last year’s cash crunch, boosting optimism that increased spending will help the broader economy regain its vigor.

The micro-finance industry is rebounding, real rural incomes are rising and unemployment is falling, according to brokerage Motilal Oswal Securities Ltd. and an Indian unit of HSBC Holdings Plc in analysis that contrasts to the distress that’s swept the farming sector.

“We believe repayments and improved collection trends have increased the confidence of companies to start disbursing loans at a healthy pace again,” Mumbai-based Alpesh Mehta and colleagues wrote in a report from Motilal Oswal.

India’s micro-finance industry, which provides small loans to entrepreneurs and business owners who have little collateral, was slammed when the government withdrew high-denomination bank notes from circulation late last year in a bid to stamp out corruption.

Source: Bloomberg (link opens in a new window)

financial inclusion, microfinance, rural development