Here’s how money is flowing in Indian economy, and where it is really going

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Published: June 26, 2018 6:14:12 PM

While there has been apprehension about private investments in the country, the flow of funds in the economy shows signs that the things may be looking up, a report by Care Ratings said.

Here's how money is flowing in Indian economy, and where it is really goingThe flow of funds in the economy shows signs that the things may be looking up. (Image: Reuters)

An economy is nothing but careful management of available resources — and for an emerging economy like India, which is growing at an average of 7%, the capital market is crucial. While there has been apprehension about private investments in the country, the flow of funds in the economy shows signs that the things may be looking up, a report by Care Ratings said. The money raised through equity issuances were higher this year at Rs 20,900

Equity issuances were higher at Rs 20,900 crore in the fiscal year 2019 as compared to the same period last year, the report said, adding that the boom in the stock market could be a driving factor. Equity issuance is the sale of new equity or stock by a firm. Financial sector dominated with a share of 80.8% as against 59.2% last year, while manufacturing got highest funds via equity issuance in the non-financial sector.

The debt segment, on the other hand, underperformed. In FY19 so far, the debt issuances accounted for 63.8% of total capital issuances as compared to 85.2% same period last year. In the debt-segment, again, the financial sector dominated the issuance, followed by the services sector, mining, construction and real-estate and others.

“In the debt segment, though issuances are lower, the fact that the non-financial sector is borrowing more is a good sign if sustained. The fact that lending to the large industry has improved in terms of smaller decline, if sustained could indicate a recovery in the investment cycle,” Care Rating said in the report.

In other segments such as commercial paper (CP) and external commercial borrowing (ECB), the capital raising was marginally higher and higher. The CP market was marginally better with Rs 3.02 lakh crores being raised in the first two months of the year compared with Rs 3 lakh crore last year. The ECB approvals for April 2018 was $3.76 billion compared with $1.30 billion in April 2017, the report said.

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