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There has been a noticeable improvement in 2019-20 in the planned or envisaged capital expenditure (capex) from all sources based on the pipeline projects sanctioned in all preceding years, according to an article in the Reserve Bank of India's latest monthly bulletin.
The investment cycle is set to gain momentum in the short to medium term, but, its sustainability needs to be watched closely, it added
The planned capex based on the pipeline projects (already sanctioned in preceding years) is poised to be high at around ₹1,20,157 crore in 2019-20, marking a significant improvement over the previous year (₹84,602 crore), said Pronita P Saikia and RK Sinha of the RBI’s Department of Statistics and Information Management.
“There are signs of improvement in the envisaged capital expenditure (capex) for the year 2019-20 based on the projects already sanctioned/contracted previously across different channels of financing,” the authors said.
Pipeline projects are those projects that are already undertaken for implementation. Capex from a pipeline project are envisaged amounts for a given year, which have got sanctioned prior to that given year.
The article assessed that a total capex (from all channels) of ₹1,96,312 crore (of which, ₹1,11,710 crore was from fresh sanctions during the year) would have been incurred by the private corporate sector in 2018-19, translating into a substantial improvement by around 24 per cent (vis-a-vis ₹1,57,705 crore in the previous year).
ECB dominates
This improvement can be mainly attributed to the External Commercial Borrowing (ECB) channel of capex financing.
In the first half of FY20, the projects funded through banks/financial institutions (FIs)/ECBs/Foreign Currency Convertible Bonds (FCCBs)/Rupee Denominated Bonds (RDBs)/Initial Public Offers (IPOs) aggregated to ₹1,87,216 crore, spread over 423 and about 48 per cent higher than the year ago period’s ₹1,26,921 crore, spread over 485 projects.
In the first half of FY20, bank/FIs funding was 45 per cent up year-on-year (yoy) at ₹1,25,305 crore (spread across 142 projects); ECB funding jumped 55 per cent yoy at ₹61,833 crore (spread over 272 projects); and IPO funding was down 84 per cent yoy at ₹78 crore (spread across nine projects).
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