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Informist, Monday, Aug 19, 2024

 

--RBI paper: Envisaged pvt capex may rise to 2.45 trln rupees FY25 

--RBI paper: Sustainability of invest cycle needs to be watched closely 

--RBI paper: Envisaged pvt capex rise points to upbeat invest cycle 

 

NEW DELHI – After slowing down during the COVID-19 pandemic, capital investment by the private sector is finally picking up, a Reserve Bank of India staff paper said today. Private sector capital expenditure is seen rising 54% on year to 2.45 trln rupees in 2024-25 (Apr-Mar), from 1.59 trln rupees last year, the paper said. 

 

The paper's estimate for the private sector capital expenditure is based on the phasing profile of the pipeline projects worth 3.91 trln rupees financed by banks and financial institutions during 2023-24. 

 

The jump in envisaged capital expenditure by private companies points to an "upbeat investment cycle," the staff paper on 'Private Corporate Investment' said. The views expressed in the paper, authored by RBI officials, do not necessarily reflect those of the central bank.

 

"Rising domestic demand and capacity utilisation, improved profitability of corporates, sustained credit demand, business optimism and government's thrust on infrastructure development, along with policy measure to encourage investment activities, bode well for private capital investment."

 

Investment intentions of private companies were buoyant last year, as reflected in the rising number of projects as well as the total cost of projects sanctioned by banks and financial institutions.

 

In 2023-24, banks and financial institutions assisted 944 projects with a record high total cost of 3.91 trln rupees, as compared to 547 projects sanctioned during the previous year having total cost of 2.67 trln rupees, the paper said.

 

Apart from assistance from banks and financial institutions, 438 companies raised 1.68 trln rupees through external commercial borrowing for capital expenditure in 2023-24. Moreover, 123 companies raised 63.10 bln rupees through domestic equity issuances via initial public offerings for funding their investment needs, the paper said. 

 

Overall, investment plans of 1,505 projects were made during 2023-24, with record investment intentions of 5.66 trln rupees, as against 982 projects in 2022-23 with investment intentions of 3.51 trln rupees. 

 

Gujarat, Maharashtra, Karnataka, Andhra Pradesh, and Uttar Pradesh together accounted for about 55% of the total cost of projects sanctioned during 2023-24, the paper said.

 

Infrastructure sector continued to attract the major share of envisaged capital investment, led by 'Roads and Bridges’, and 'Power' sectors, reflecting the government push towards infrastructure development.

 

Government-led capital investment has been the main driver of India's growth since the pandemic, while private sector capital expenditure has lagged behind. The Union Budget for 2024–25 (Apr-Mar) has pegged capex at 11.1 trln rupees, up 17.1% from 9.49 trln rupees last year. 

 

In a separate paper as part of the RBI's bulletin for August, the central bank staff said that demand conditions are improving in India on the back of a revival in rural consumption. This pick-up in demand is expected to reinvigorate participation of the private sector in investment, the 'State of the Economy' paper said.

 

Global financial market volatility, protracted geopolitical tensions and geo-economic fragmentation could dampen the investment plans of India's private sector, the paper said. However, the investment cycle is expected to remain upbeat, while its sustainability needs to be watched closely, it said.  End

 

Reported by Shubham Rana

Edited by Deepshikha Bhardwaj

 

 

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