According to an article published on Monday by the Reserve Bank of India, the private business sector's capex is expected to increase to Rs 2.45 lakh crore in 2024-25 from Rs 1.59 lakh crore in 2023-24. The article drew this evaluation after considering the pipeline project's financial phasing profile.
This is one of the more optimistic outlooks for private capex for the current fiscal year. Other organizations and independent economists are less optimistic about the trend in business investment.
According to the paper, part of the RBI's August bulletin, but not necessarily articulating the central bank's views, the authors Kamal Gupta, Rajesh B Kavediya, Sukti Khandekar, and Snigdha Yogindran said that investment intentions of private corporates remained buoyant during 2023-24, as reflected in a higher total number of projects and total cost of projects sanctioned by banks/FIs. "Greenfield projects accounted for the lion's share of about 89% in the total cost of projects financed," according to them.
According to the report, the infrastructure sector continues to garner the majority of anticipated capital investment, headed by the 'roads & bridges' and 'electricity' sectors. According to phasing plans, aggregate capital expenditures planned by the private business sector in 2023-24 grew by almost 57% over the previous year.
However, in an opening note to the report, the RBI mentioned the "hitherto subdued participation of the private sector in total investment." "Rural consumption is reviving due to rising earnings, contributing to an increase in aggregate demand. This demand stimulus is likely to boost the private sector's hitherto low involvement in overall investment," according to the paper.
Citing statistics from the Centre for Monitoring of Indian Economy (CMIE), FE reported that the value of new investment projects announced plunged 92% year on year to Rs 59,900 crore in the June quarter, extending a downward trend that had begun three quarters earlier. This was the lowest amount since September 2009, when the Centre for Monitoring of Indian Economy (CMIE) began collecting statistics on the government's and private sector's capital expenditure plans. It was suggested that the reduction was due in part to decision-making delays during the election season. However, the general weakness of the investment cycle is undeniable, as seen by the reduction in private-sector project announcements since the second quarter of last fiscal year.
According to CMIE, the increase in private and government investment announcements dropped by 94% and 84%, respectively, in the April-June quarter. In value terms, the June quarter saw the lowest level of project announcements by both the commercial and public sectors since September 2009. Also, the private sector's share of such new projects fell to 66.7% in the June quarter, down from 85.4% in the March quarter and 90.9% in the preceding three months. This appears to be one of the lowest levels in recent years, barring the disruptive pandemic time.
The private sector's declaration of investment intents fell for the fourth quarter in a row to Rs 35,600 crore, while the government's fell for six quarters in a row to Rs 24,700 crore in the June quarter of this year.
According to the RBI study, aggregate capacity utilisation (CU) in the manufacturing sector climbed to 74.7% in Q3FY24, up from 74% the previous quarter. The seasonally adjusted CU climbed by 10 basis points (q-o-q) to 74.6%, the RBI reported yesterday.
