A Reserve Bank of India-organised article said on Monday that the envisaged capex by private corporate sector is estimated to jump to Rs 2.45 lakh crore in 2024-25 from Rs 1.59 lakh crore in 2023-24. The article made this assessment after taking into consideration the phasing profile of pipeline projects finances.
This is one of the brightest outlooks on private capex for the current financial year. Other agencies and independent economists are less sanguine about the trend in corporate investments.
According to the paper, part of the RBI’s August bulletin, but not necessarily articuilating the central bank’s views, the authors Kamal Gupta, Rajesh B Kavediya, Sukti Khandekar and Snigdha Yogindran said that investment intentions of private corporates remained buoyant during 2023-24 as reflected in higher total number of projects as well as the total cost of projects sanctioned by banks/FIs. “Greenfield projects accounted for the lion’s share of about 89% in the total cost of projects financed,” they noted.
Infrastructure sector continued to attract major share of envisaged capital investment, led by ‘roads & bridges’ and ‘power’ sectors, as per the article. Phasing plans indicate that aggregate capex intended by the private corporate sector in 2023-24 increased significantly by about 57% over the preceding year, it added.
However, in an introductory note to the bulletin, the RBI referred to the “hitherto subdued participation of the private sector in total investment.” “…Aggregate demand conditions are gathering momentum with revival in rural consumption on the back of growing incomes. This stimulus to demand is expected to reinvigorate the hitherto subdued participation of the private sector in total investment,” the note said.
Citing Centre for Monitoring of Indian Economy (CMIE) data, FE had reported that the value of new investment projects announced fell a sharp 92% on year to Rs 59,900 crore in the June quarter, extending a declining trend of the previous three quarters. This was the lowest value since September 2009, when the Centre for Monitoring of Indian Economy (CMIE) started collecting data on capex plans of the government and the private sector. The decline, it was nooted, is partly owing to the deferment of decisions amid the election period. But the general feebleness of the investment cycle is unmistakeable, given the contraction phase for private-sector project announcements since the second quarter of last fiscal.
In the April-June quarter, the growth in the private and government investment announcements declined 94% and 84%, respectively, as per CMIE. In value terms, June quarter reported reported the lowest level of project announcements by both private and the government since September 2009. Also, private sector’s share in such new projects plunged to just 66.7% in June quarter, down from 85.4% in March quarter and 90.9% in the previous three-month period. This would also appear to be one of the lowest level over many years, excluding the disruptive prandemic period.
The growth in the private sector’s declaration of investment intents contracted for four quarters in a row to Rs 35, 600 crore and that of the government contracted for six quarters in a row to Rs 24,700 crore in the quarter ended June this year.
The RBI survey had found that at the aggregate level, the capacity utilisation (CU) in the manufacturing sector increased to 74.7% in Q3FY24 from 74% in the previous quarter. The seasonally adjusted CU increased sequentially (q-o-q) by 10 basis points to 74.6%, the RBI had noted earlier.