(FE)
With a resounding domestic political victory behind him, Indian Prime Minister Narendra Modi turns attention back to policies this week. One area key to watch for investors: progress on resolving a mountain of bad debt that’s restraining the private economy. Modi, who swept to power in federal elections in 2014 and this weekend notched a decisive win in India’s largest state, has championed reforms for businesses yet overseen an expansion that’s been propelled by the public sector. Key to that shortfall has been a decline in credit exacerbated by the lack of a national plan to clean out non-performing loans.“Loan growth has been falling and remains anemic by historical standards as a result of the banks’ asset-quality challenges,” said Swee-Ching Lim, a portfolio manager at Western Asset Management in Singapore who’s been analyzing credit markets for almost two decades. “This lack of credit growth will likely continue to be a headwind” for India’s economy, he said.
