Uncertain private sector forecast due to struggling middle-class consumption, says Saurabh Mukherjea

Mukherjea says that unless the middle class jobs come back, demand for home loans will be lower

The private sector forecast is uncertain because India’s middle class which was supposed to drive the consumption story is struggling, said Saurabh Mukherjea of Marcelleus Investment Managers, in a conversation with Moneycontrol. He said that in the past 12 months, middle-class consumption has been somewhat throttled along with consumption from lower-income customers.

Mukherjea believes that the private sector capex will create jobs in India. “With interest rates coming down, the private sector will see 18-20 percent loan growth coming from private sector players,” said Mukherjea.

Experts expect the Reserve Bank of India (RBI) to cut interest rates starting next year. After opting for a pause four times, experts say that this would be the fifth consecutive policy where the central bank would maintain the status quo in key interest rates. The RBI has kept the repo rate unchanged at 6.5 percent since February 2023, when the rate was raised from 6.25 percent to 6.5 percent.

Mukherjea says that unless middle-class jobs come back, demand for home loans will be lower.

Talking about the growth in unsecured credit he said, “There would be very few listed lenders, who have more than 2-3 percent unsecured loans on their books. However, for unlisted players, this unsecured loan number could be a bigger story."

Top banks including HDFC Bank, ICICI Bank and Kotak Mahindra Bank’s unsecured loan portfolios increased by as much as 30 percent in the July-September quarter. The growth comes in the backdrop of concerns flagged by the RBI over the surge in such loans and a reminder to strengthen their surveillance mechanisms.

"Banks and NBFCs would be well advised to strengthen their internal surveillance mechanisms, address the build-up of risks, if any, and institute suitable safeguards in their interest,” RBI governor Shaktikanta Das said at a press conference after the Monetary Policy Committee meeting in October.

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