Private companies’ investment plans fell for last 7 years in row: RBI study

There is a three times rise to over Rs 10 lakh crore in bank funds stuck in projects that failed to take off, were abandoned or stalled rose three times, the report said.

A Reserve Bank of India (RBI) study has shown that private corporate investment plans have fallen for the seventh year in a row on account of economic slowdown, poor project appraisals and huge corporate leveraging, a report in FE Online said.  

There is a three times rise to over Rs 10 lakh crore in bank funds stuck in projects that failed to take off, were abandoned or stalled rose three times, the report said.

Capex plans that were at their peak at Rs 370,600 crore in FY11, are on a continuous decline, falling 44.90 per cent from Rs 269,900 crore in FY14 to Rs 148,700 crore, the report said.

“Total capex of Rs 148,700 crore would have been incurred by the private corporate sector in 2017-18, of which Rs 80,200 crore was from fresh sanctions during the year. The year marked the seventh successive annual contraction in the private corporate sector’s capex plans”, the report quoted RBI study.

However, despite fall, the envisaged capital expenditure from the pipeline projects already undertaken showed an improvement over last year’s pipeline, the central bank study said.

The bank expects some recovery in the capex cycle on the back of the projects sanctioned in the first half of FY19, together with the pipeline projects already undertaken. “Going forward, investment activity is expected to gather pace, benefitting from the pipeline projects lined up by private corporates. A revival in the investment cycle could be underway in the medium term, as revealed in these investment plans,” the study said.

The study said that the efforts taken up recently to strengthen balance sheets of both corporates and the banking sector should provide a conducive environment for a pick-up in capital formation.

Source: FE Online


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