Business Daily from THE HINDU group of publications
Tuesday, Aug 14, 2007
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Business Daily from THE HINDU group of publications Tuesday, Aug 14, 2007 ePaper |
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Corporate Corporate - New Projects Money & Banking - Credit Market Capital investments may top last year’s levels: RBI
Shortfall of Rs 58,253 cr to be made good by new projects Apex bank confident of improved corporate profitability Admits to risk from rising rates, stronger rupee and growing wage bill
Our Bureau Mumbai, Aug 13 Despite rising interest rates and appreciating rupee, capital investments by Indian companies in the current fiscal could exceed last year’s level, according to a study by the Reserve Bank of India. Indian corporates expect to spend Rs 1,48,207 crore in capital expenditure in the current fiscal in projects already appraised and sanctioned by banks and financial institutions. This is against the total investments of Rs 2,06,460 crore in 2006-07. However, the RBI expects the shortfall of Rs 58,253 crore to be more than made good by new projects that will come up in the current year. With the economy slated to grow by 8.5 per cent, the RBI expects the incremental demand for goods and services to drive fresh investments in capacity. The apex bank also sees a marked improvement in corporate profitability. The study said that the resultant strong balance sheets will encourage corporates, which are already operating at optimum capacity, to make fresh investments. Continued momentum in industrial production coupled with the buoyancy in export growth bodes well for investment demand. Besides, the Budget measures to boost infrastructure development are likely to improve the investment climate. However, the RBI cautioned that the demand may moderate due to its cyclical nature of investment demand. Moreover, there is the downside risk arising from rising interest rates, appreciating rupee and the growing wage bill for many industries. But these risks remain limited and could be offset by sustained inflow of large capital amid easy global liquidity. The growth in capital spending has been steadily moving up since 2002-03, peaking in 2004-05 and slowing down in 2005-06. However, last year saw investments more than double, mainly on account of 88 large projects each with cost exceeding Rs 500 crore. These projects aggregated to Rs 2,01,365 crore, accounting for more than two-thirds of the total project investments. The current year will see an increase in investments, but at a decelerated pace. Last fiscal, Gujarat ranked first with proposed investments of Rs 73,170 crore in 86 projects, accounting for 25 per cent of the total investments. It was followed by Andhra Pradesh (8.9 per cent), Maharashtra (8.6 per cent) and Tamil Nadu (8.6 per cent). The infrastructure group, which included 37 IT parks and SEZ projects, accounted for the highest share of 35.9 per cent of the total cost of projects, amounting to Rs 101,744 crore. Half of these investments was in power projects (Rs 51,451 crore), followed by nine telecom and eight roads and other projects.
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