Hi everyone,   

Welcome to the 163rd edition of The Pattern, a weekly where we dive into the latest from the world of economy, technology and finance. Let’s get started. 

What are we hearing this week? Potentially alarm bells for the Indian economy! With the bank credit growth plummeting from 16% a year ago to a cautious 9% in June 2025, along with export and diesel consumption declining, there are signs that a storm could be in the offing.  

Yet in this scenario of key sectors showing signs of weakness, there is a strong undercurrent of optimism for future credit growth. Is the country headed to a new phase of credit expansion or simply relying on borrowed time with borrowed money? 

Is a slowdown inevitable? 

According to the latest report from Nuvama, the robust 11% growth in GST collections has plummeted to a mere 6.2% as of June 2025, another key indicator of consumption slowdown. There’s more, the double-digit export growth witnessed in FY23 has declined to only 6%. Consumer spending on big ticket items has stalled with passenger vehicle sales dropping to 2%, while real estate property sales are down to 4% from a healthy 28% last year. 

With several economic indicators pointing downwards, you’d expect the financial sector to provide crucial credit that helps stabilize growth. However, while the credit demand is surging – it’s not exactly the highly productive kind.  

For instance, a report stated that a staggering 93% of salaried individuals are relying on credit cards. Their monthly income? Less than Rs 50,000. Additionally, almost 85% of self-employed people also swear by plastic as a way to finance their purchases.  

While this is a big win from a financial inclusion context, it’s concerning if the bulk of a country’s credit growth comes from sub-prime borrowing which can further add fuel to the fire.  

While this fintech-led digital revolution is democratizing credit, an important question arises: is this a genuine sign of aspirational spending or a desperate attempt to make ends meet with instant liquidity? 

Shaky foundations  

It’s not just individuals availing more credit. Recent data suggests that even smaller (and riskier) businesses are getting increased credit from public sector banks. This is part of the government’s policy push to improve access to credit for even subprime businesses but in conjunction with the macroeconomic conditions – could spell disaster.  

Already, the experience with Mudra loans hasn’t been too great.  

Bottom line  

India’s financial sector has been a beacon of hope and a force of stability in the face of global headwinds. While everyone expects it to hold through the storms, it might be worth the attention of regulators and policymakers to see if the exuberant growth is indeed sustainable. Or even desirable?  

The Reserve Bank of India has already used multiple sharp and blunt instruments to cut down lenders’ reliance on unsecured credit, but this seems to be a gravy train without brakes.  

Whether India’s economic indicators improve in the medium term remains to be seen but it would be prudent to monitor and optimise the quality of credit while we seek to increase its quantity.  

This is all for this week. I will see you next week. As always, leaving some reading recommendations below.  

  Reading List 

• Study finds 93 pc of low-income salaried individuals rely on credit cards 

• Sub-prime lending by PSBs rises on the back of govt guarantees 

• Warning signs? India's high frequency economic indicators highlight slowdown 

• Unsecured loan demand to rebound in H2, aiding margin recovery: Nitin Aggarwal 

Thank you for reading. If you liked this edition, forward it to your friends, peers, and colleagues. You can also connect with me on X here and follow FinBox on LinkedIn to always get all updates. 

Cheers, 

Mayank