The investment plans of Indian companies are expected to remain subdued during 2013-14, notes a Reserve Bank of India study released as part of the central bank's monthly bulletin.
The RBI said in its assessment that the capital expenditure planned for 2013-14 on projects already under execution adds up to R1,62,000 crore. The RBI had said that even if companies stick to their already detailed investment plans, fresh investment of around R1,29,900 crore would be needed to match up to the capital expenditure seen in 2012-13, which stood at R2,91,900 crore
“Going by the assessment on date, capital expenditure of the above order does not appear to be feasible,” the report added.
The report also cites data from the Centre For Monitoring Indian Economy (CMIE), which suggest that investment proposals for new capacities, which declined sharply in 2012-13, have further tapered off in the first quarter of 2013-14.
The study was based on data obtained from 39 banks and financial institutions active in project finance and statistics of external commercial borrowings raised by companies. The study said that new investment plans of 969 companies in 2012-13 aggregated R2.63 lakh crore against 1,127 companies’ intentions for aggregate investments of R2.51 lakh crore for 2011-12. The investment plans in 2012-13 were led by projects that cost more than R5,000 crore in the power, metal, metal products and telecom industries.
The apex bank said that demand conditions continue to be a major factor in driving investment intentions. With a baseline projection of real GDP growth at 5.5% in 2013-14, demand conditions may not improve substantially.
“While the government has initiated some steps in the recent past to improve the investment climate, results are yet to be visible,” said the RBI.
Additionally, projects involving large amounts are getting stalled due to policy bottlenecks, says the RBI. “The problem has been compounded by large projects in sectors like power and telecom getting stalled over the last few years, which may lower the capital expenditure in pipeline. Removing policy bottlenecks may re-ignite the investment scenario,” the report said.