News: India Inc to invest $607bn in projects
(TNN 02/04/2006) New Delhi - Corporate India is firing on all cylinders. Such is the unprecedented corporate action that the quantum of outstanding project investment proposals is at a historic high.
Figures collated by CMIE reveal that at the end of January ’06, almost 10,200 proposals amounting to a cumulative investment of more than Rs 27 lakh crore (almost $607bn) were outstanding. This, significantly, works out to 77% of GDP of $785bn.
Such is the pace of investment that a recent survey quarter recorded fresh investment proposals of almost Rs 2.9 lakh crore, a sum greater than the annual fresh investment of between 1.5-2 lakh crore seen in the last eight years. The mild dark cloud to this silver lining is that a significant proportion of outstanding investments in manufacturing is accounted for by three sectors.
Fresh investment proposals are more than keeping pace with the cumulative outstanding project proposals. It is estimated that from May ’05 to January ’06, almost Rs 6,750 crore worth of fresh investments have been proposed.
This works out to almost $150bn. Figures collated by CMIE also reveal that of the total outstanding project investments of Rs 27.3 lakh crore at the end of January ’06, almost 30% were accounted for by manufacturing, 28.7% by electricity and 27.3% by services.
Mining, irrigation and construction together made up less than 15% of cumulative outstanding investments. Interestingly, in manufacturing, steel accounted for almost half the outstanding investments. Textiles and paper are two other industries that have more than doubled investments.
This hectic capex commitment has been motivated in large measure by the peaking out of capacities. It is estimated that capacity utilisation levels for most industries are between 80-90%. That the industry had not been investing much too is clear. The rate of growth in fixed assets slowed down steadily to a low of 6.5% in ’04-05 from a high of 14.2% in 1998-99. “The impact of these investments is expected to be significant. The much needed investment flow to infrastructure provides banks with another avenue for credit deployment.
This spend will also have a positive feed-through in related industries such as capital goods, transport, etc.,” says a recent CLSA report.Credit growth has climbed to new levels. The credit growth (Y-o-Y) at 30% plus is the highest seen in a decade, the last peak of 27% was recorded as far back as January 1995.
“This credit momentum is sustainable,” says the CLSA report. The rate of increase in long term borrowings is also borne out by growth data from CMIE. Growth rate of total borrowings (for non-financial companies) bottomed out at 1.3% in ’02-03. It rose in year ’03-04 to 4% and to 4.6% in ’04-05.
Corporate India, however, seems less reliant on borrowings now. Growth in total corporate borrowings in year 1998-99 was as high as 7.9%. While borrowings is one way to fund this expansion, companies now have enough internal resources too. The growth in retained earnings in ’04-05 worked out to a healthy 42%.
Figures collated by CMIE reveal that at the end of January ’06, almost 10,200 proposals amounting to a cumulative investment of more than Rs 27 lakh crore (almost $607bn) were outstanding. This, significantly, works out to 77% of GDP of $785bn.
Such is the pace of investment that a recent survey quarter recorded fresh investment proposals of almost Rs 2.9 lakh crore, a sum greater than the annual fresh investment of between 1.5-2 lakh crore seen in the last eight years. The mild dark cloud to this silver lining is that a significant proportion of outstanding investments in manufacturing is accounted for by three sectors.
Fresh investment proposals are more than keeping pace with the cumulative outstanding project proposals. It is estimated that from May ’05 to January ’06, almost Rs 6,750 crore worth of fresh investments have been proposed.
This works out to almost $150bn. Figures collated by CMIE also reveal that of the total outstanding project investments of Rs 27.3 lakh crore at the end of January ’06, almost 30% were accounted for by manufacturing, 28.7% by electricity and 27.3% by services.
Mining, irrigation and construction together made up less than 15% of cumulative outstanding investments. Interestingly, in manufacturing, steel accounted for almost half the outstanding investments. Textiles and paper are two other industries that have more than doubled investments.
This hectic capex commitment has been motivated in large measure by the peaking out of capacities. It is estimated that capacity utilisation levels for most industries are between 80-90%. That the industry had not been investing much too is clear. The rate of growth in fixed assets slowed down steadily to a low of 6.5% in ’04-05 from a high of 14.2% in 1998-99. “The impact of these investments is expected to be significant. The much needed investment flow to infrastructure provides banks with another avenue for credit deployment.
This spend will also have a positive feed-through in related industries such as capital goods, transport, etc.,” says a recent CLSA report.Credit growth has climbed to new levels. The credit growth (Y-o-Y) at 30% plus is the highest seen in a decade, the last peak of 27% was recorded as far back as January 1995.
“This credit momentum is sustainable,” says the CLSA report. The rate of increase in long term borrowings is also borne out by growth data from CMIE. Growth rate of total borrowings (for non-financial companies) bottomed out at 1.3% in ’02-03. It rose in year ’03-04 to 4% and to 4.6% in ’04-05.
Corporate India, however, seems less reliant on borrowings now. Growth in total corporate borrowings in year 1998-99 was as high as 7.9%. While borrowings is one way to fund this expansion, companies now have enough internal resources too. The growth in retained earnings in ’04-05 worked out to a healthy 42%.
posted by InCar Group Press Room at 23:37
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