Craig Tindale: RBI rules starve India’s factories of affordable credit (opens the source in a new tab)
- In part two, Tindale blames India’s banking rulebook: a 4% inflation target driven by food prices keeps rates high, so in December 2025 Indian borrowers paid about 7% in real terms, against about 2.3% in China.
- Capital rules make an unrated factory loan far costlier for a bank to hold than a home loan or a government bond, so for every rupee of new credit to industry, about two and a half went to consumption and housing.
- India’s 19.7 million small manufacturers cannot raise equity and bear the brunt; manufacturing has slipped from 17.3% of GDP in 2006 to 13.1%.
- ~7%
- real borrowing cost, India
- ~2.3%
- real borrowing cost, China
Why it matters If he is right, the real bottleneck for Make in India is the price of credit, which no factory subsidy fully offsets.
Other side Would cheaper, state-directed credit build factories or repeat India’s own bad-loan cycle? Tight money also shields savers and the poor from inflation.
Source:X (free to read) ↗