Investment rebound could hold the key to a recovery in 2013

Dec 29 2012, 09:22 IST
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India Inc does not seem to be very excited about making investments right now.  (Reuters) India Inc does not seem to be very excited about making investments right now. (Reuters)
SummaryIndia Inc does not seem to be very excited about making investments right now.

Even as the Lehman crisis broke out in 2008 and led to a global financial trouble, including India, the crisis had a minimal impact on India’s domestic growth factors including the corporate capital expenditure plan.

Projects sanctioned by banks and financial institutions in 2008-09 stood at Rs 3,33,039 crore (projects of Rs 10 crore and above) and was up from projects worth Rs 2,44,296 crore sanctioned by them in 2007-08. It rose further to Rs 4,55,968 crore in 2009-10.

However, domestic policy issues, government’s flip flop on certain regulations and issues linked to corruption over the last 2-3 years have severely dented India Inc’s confidence to go ahead for capital expenditure on new projects and the general corporate activity.

Experts say, the real activity is still some time away and 2013 may just prove to be a year of preparation for that transformation by corporates.

The number of projects sanctioned by banks in 2010-11 came down to 710 from 754 in 2009-10 and the project cost sanctioned by banks and financial institutions which stood at Rs 3,92,600 crore in 2010-11 witnessed a decline of 14 per cent over the previous year.

The decline was far sharper in 2011-12 as the number of such projects came further down to 668 with a sanctioned assistance by banks falling down to Rs 2,12,00 crore in the year, a downfall of 46 per cent over 2010-11.

Market experts suggest that the trend continues to be the same in 2012-13 and with almost half of the financial year already gone by, India Inc does not seem to be very excited about making investments right now.

“There has been a decline in corporate activity because of the economic slowdown and with growth coming down from 8.5 per cent to 5.5 per cent, automatically the industry slows down and has taken a step back,” said Shanti Ekambaram, president, corporate and investment banking at Kotak Mahindra Bank.

There has been a clear decline in the activity in the infrastructure and the metal segment. While the sanctioned projects by banks and FI’s in the infrastructure space stood at Rs 2,15,200 crore in 2010-11, it halved to Rs 1,02,900 crore in 2011-12. In the metal space it has come down from Rs 80,000 crore to Rs 31,500 crore in the same period.

“Infrastructure is the space to start with. Investment in capital goods and rise in order books of heavy industries will have a

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