Column : Pipeline to heaven

Fresh investment proposals, according to CMIE’s CapEx database, ramped up quickly after languishing at around R2 trillion per annum for seven years from 1997 through 2003. In 2004, fresh investment proposals touched R4 trillion. They crossed R7 trillion in 2005, then more than doubled to R16 trillion in 2006 before peaking at R20 trillion in 2007. Calendar 2008 and 2009 also saw handsome levels of R19-20 trillion. Fresh investment proposals during this period were 10 times the levels in 2002. The fall in fresh

investment proposals in 2011 has been interpreted as a sign of the end of the investments cycle. However, this is an erroneous conclusion.

There are no investments cycle that can be discerned from the data. The CapEx database goes back till 1995 and it does not indicate any. The official

national accounts statistics goes back to the 1950s and this not indicate any either. Neither the growth in gross fixed capital formation nor its proportion to the gross domestic product indicate any cyclicality. The data only indicates that the growth in investments and its proportion to GDP since 2004 have been exceptionally high.

So, there is no reason to believe that the fall in fresh investment proposals in 2011 is the beginning of

... contd.