The return of the consumer

To give credit where its due, FY14 saw the PML-N government giving credit where it was long overdue: the private sector. With government borrowing from the central bank and from commercial banks screeching to their lowest levels in recent memory, private sector credit off-take took off last year.
According to the central bank's recently released full-year numbers, loans to private sector businesses stood at Rs297 billion in the last fiscal year. Not only is this number the highest annual off-take since FY08; compared to the average annual private credit off-take of Rs72 billion in the last five years, last year's performance is indeed phenomenal.
The growth mainly came from businesses in the manufacturing sector, which borrowed about Rs187 billion (all numbers on net basis) in FY14, as against Rs59 billion the year before. A bulk of this increase came from food and beverages products that alone contributed about 55 percent of the incremental manufacturing sector borrowing over previous year.
Food and beverages segment took loans of Rs97 billion in FY14, compared to Rs26 billion in the year before. In contrast, textile sector loans stood at Rs43 billion in the last fiscal year. This, compared to the borrowing of Rs24 billion in the year before, is quite a bit of growth, though the growth is not as much as in other sectors such as food and beverage. Also, its not as if that textile credit in FY14 was at multiyear high; the sector had borrowed Rs44 billion just two years ago.
Other credit drivers included the commerce and trade sector (import/export and retail and wholesale), where borrowings rose to Rs16 billion in FY14 as against an average annual net credit retirement of about Rs8 billion in the preceding five years. Another major credit driver was the telecom sector, where spectrum auction-related borrowing was the biggest highlight of the year.
The common theme to all this is rise of the consumer, which also sits well with the increases in consumer financing. While net retirements by the house-building segment has almost come to a halt (with net borrowing of Rs300 million in FY14), borrowings for auto sector and personal financing have been on the rise for the second year running. Whether these green shoots will mature further this year and after may depend much on the country's political landscape.