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Capital expenditure plans by private sector companies may decline by an annual rate of 11 per cent starting 2016, according to a survey by Crisil.
The survey of 192 listed, public and private sector companies from key sectors such as infrastructure, energy, metals and showed a 4 per cent decline in capex plans for 2015-16.
The report said that while 90 per cent of the companies polled were of the opinion that sentiment has improved on the ground and capex should begin to recover by the next fiscal, ironically, near-term plans for their own companies belied this optimism.
Raman Uberoi, President, Ratings, Crisil, “The message coming through is crystal clear: as things stand, there is only one way to kick-start the all-important investment cycle, and that is through public investment. The onus is on the Centre to do the initial heavy lifting.”
In terms of sectors, infrastructure and energy are expected to see a small increase in capex, but it will be more than offset by a decline in the manufacturing sector, the survey showed.
Demand surgeAmid softening interest rates and buoyant capital markets, funding is unlikely to constrain investments.
According to Prasad Koparkar, Senior Director, Crisil Research, “If there is one thing corporates are looking for, it is better visibility in terms of a sharp improvement in demand. This seems to be the real reason behind the hesitation to commit larger monies.”
He added that demand has picked up and infrastructure and energy capex has shown a small increase as against a decrease last year.
Manufacturing thrustAccording to Crisil quick resolution of land-related issues and other on-the-ground factors impacting stuck projects, significant thrust to — and innovative financing schemes for — renewables and specific provisions to boost investment in manufacturing as part of ‘Make in India’ programme are the things that can make a difference.
More than 80 per cent of the capex is expected to be from energy (mainly oil and gas), infrastructure (mainly power and roads) and metals sectors in 2015-16 — just the way it was expected to be in 2014-15. Bulk of these is in projects under implementation and expected to be incurred next fiscal.
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