The projects sanctioned in the first half of 2018-19 show some recovery in the capital expenditure (capex) cycle, according to a Reserve Bank of India study.
Going forward, investment activity is expected to gather pace, benefiting from the pipeline projects lined up by private corporates, said a study ‘Private Corporate Investment in 2018-19: Slow Recovery Underway’ by S Sujeesh Kumar and RK Sinha of RBI's Department of Statistics and Information Management.
The study said: “A revival in the investment cycle could be underway in the medium term, as revealed in these investment plans. Recent efforts to strengthen balance sheets of both corporates and the banking sector should provide a conducive environment for a pick-up in capital formation.
“Improved capacity utilisation and business expectations in the first quarter of 2018-19 polled by various surveys are providing lead indication of a reinvigoration of investment activity in the Indian economy in the period ahead.”
As per the study, in the first half of 2018-19, as many as190 projects with a total cost of ₹91,400 crore were sanctioned by banks/ financial institutions. A total of 451 investment proposals aggregating ₹1,15,800 crore were sanctioned through the three channels of finance — banks/ financial institutions; external commercial borrowings/ foreign currency convertible bonds/ rupee denominated bonds; and initial public offerings.
The study assessed that a total capex of ₹1,48,700 crore would have been incurred by the private corporate sector in 2017-18 of which ₹80,200 crore was from fresh sanctions during the year.
“The year (2017-18) marked the seventh successive annual contraction in the private corporate sector’s capex plans. However, the envisaged capex from the pipeline projects already undertaken showed an improvement over the previous year's pipeline,” it added.
On the basis of the pipeline projects (which are already undertaken for implementation) sanctioned in preceding years, the planned capex could amount to ₹79,200 crore in 2018-19, marking an improvement over the previous year (₹68,500 crore), the study said.