In a sweet spot.

"India Inc is in a sweet spot. The country's economy is growing at a solid clip, helping propel fortunes and prospects of Indian companies operating in a range of sectors, from telecoms, airports and ports to commodities, utilities and chemicals." "This is despite several companies, across sectors, spending more on capital expenditure and energy-transition initiatives," wrote Ashok Dhingra & Neel Gopalakrishnan. "India's gross domestic product (GDP) slipped to a 15-month low of 6.7% on an annual basis in the April-June quarter of the current financial year, the government data showed." Moody's expects GDP growth at 7.2% in FY25 and 6.6% in FY26. Fitch projects 7.2% and 6.5%. ET. "India remains the fastest growing major economy despite the pace of growth slowing to a five-quarter low of 6.7% during April-June." "In the medium term. the Indian economy can grow at a rate of 7% plus on a sustained basis if we can build on the structural reforms undertaken over the last decade," said Chief Economic Advisor V Anantha Nageswaran. ET. "Growth in India's eight core sector industries slowed to 6.1% in July compared to 8.5% in the same month last year, according to government data. It picked up compared to 5.1% last month, helped by business activity and road construction." BS. However, is it possible that this sizzling growth is being fanned by easy money due to forced lending by banks? "MSME (medium, small, micro enterprises) credit by scheduled commercial banks under priority sector lending in July stood at Rs 25.10 trillion, growing by 15% from Rs 21.82 trillion deployed during the year-ago period," according to RBI data. FE. Naturally, "Liquidity in the Indian banking system steeply declined to Rs 0.95 trillion from a high of Rs 2.86 trillion, according to a research report by the Union Bank of India," "despite repeated calls by the Finance Minister and the RBI Governor for banks to take steps to increase liquidity in the system." TOI. Banks are having to borrow to lend. "Banks' borrowing through market instruments has climbed to its highest levels, jumping past the Rs 9 trillion mark, as persistently faster pace of credit growth than deposit growth compels lenders to rely on other routes to raise funds." "As on July 26, bank credit growth was at 15.1% year-on-year, while deposit growth was at 11.0%, RBI data showed." ET. "While banks have been struggling to attract deposits, customers have been borrowing heavily to buy homes and for other purposes." Also, people are investing more in mutual funds, insurance funds and pension funds instead of bank savings. Mint. People are pouring money into stock markets, attracted by the relentless rise in both the indices. On 30 August, the Nifty 50 closed at a record high of 25,235.90 while the Sensex also closed at a record high of 82,365.77. "Year-to-date, the Nifty 50 is up 16%, while the Sensex has gained 14%." Mint. Rising markets attract more investors and more investments raise the markets even higher. Ominously, "SBI (State Bank of India) managing director Ashwini Tewari...said a correction in the equity markets 'over time' can help banks get back deposits it has ceded." TOI. However, a 1-2% correction will not divert money to banks. It will only encourage investors to 'buy the dips' (Investopedia). The markets have to fall by significantly and keep falling to stop people from buying more shares. But then, investors will incur heavy losses and will probably not have the funds to save in banks. India is in a sweet spot. Will we stay there?