India’s overall financial conditions have shown a healthy improvement, thanks to low cost of funds, strong liquidity, better external financial linkages and uptick in economic activity, says a survey.
The Financial Conditions Index has risen to 70.3, up from 67.8 in the previous quarter, according to the study jointly brought out by Confederation of Indian Industries and Indian Banks’ Association ahead of Reserve Bank of India’s fifth bi-monthly policy review on Tuesday. A reading of 50 divides expansion and contraction, PTI reported.
As per the survey, a majority of respondent banks and financial institutions reported improvement or no change in overall financial conditions as against a deterioration over the previous quarter.
“It is heartening to note that financial conditions of the Indian economy are improving in tandem with the overall macroeconomic outlook,” CII Director General Chandrajit Banerjee said in the statement.
“The scale of improvement in the financial conditions index for the current quarter will provide necessary comfort to RBI in continuing and further extending the accommodative monetary policy stance for supporting higher economic growth.”
The index is based on a survey of major banks and financial institutions on their expectations of key financial and economic variables determining financial conditions of the Indian economy. About 36 leading banks, including 21 public sector ones and financial institutions participated in the survey.
The CII-IBA Financial Conditions Index was launched in the first quarter of 2015-16 to assess the short-term financial conditions to facilitate regulatory and policy decisions.
It also aims at providing early signals on turning points and helps track credit flow for industry and service sectors.
