Improvement In Investment Climate

Font Size

Print

Feedback

Email

Discuss

Mumbai, May 18: Indications of an improvement in investment climate are getting clearer and a robust business optimism is permeating the Indian industry, said the Reserve Bank of India in its Report on ‘Macroeconomic and Monetary Developments in 2003-04.’

It said banks’ non-food credit off-take has picked up since the second half of 2003-04, sanctions and disbursements by All-India financial institutions were substantially higher, and external capital flows have been of an unprecedented order.

The buoyant performance of the private corporate business sector is reflected in market and successive increases in growth of sales and profits. The corporate sector also experienced a steady decline in interest payments. It said that the continued buoyancy of the capital goods sector augurs well for industrial performance in future.

The outlook from industry has improved considerably. The business expectations survey of the National Council of Applied Economic Research (NCAER) indicates a better outlook. The business confidence index shows a rise by 6.7 per cent in January-June 2004 over October 2003-March 2004 reflecting the buoyant corporate results and stable global environment. The Indian Leading Index of the Delhi School of Economics-Economic Cycle Research Institute (DSE-ECRI) released in March 2004, has also shown continued optimism. A majority of respondents in the business outlook survey of the Confederation of Indian Industry (CII) for October-March 2004 expected capacity utilisation in the range of 75-100 per cent with no change in inventory levels and increase in profit margins.

The report has mentioned that the rate of gross domestic capital formation (GDCF) increase from 23.1 per cent of GDP in 2001-02 to 23.3 per cent in 2002-03 was solely because of the increase in the rate of investment of the household sector. The total consumption expenditure declined to 76.9 per cent of GDP in 2002-03 owing to a fall in private final consumption expenditure. Government final consumption expenditure, on the other hand, remained unchanged in relation to GDP.

However, the performance of the infrastructure industries was generally lacklustre in 2003-04 with some improvement during February and March 2004. Crude petroleum was adversely affected on account of high water-oil ratio in some of the oil fields upto September 2003. Cement production slowed down on account of less than expected demand in he post-monsoon period. The increased prices of raw materials and other costs adversely affected steel production in 2003-04.