A Reserve Bank of India (RBI) study on corporate investments released on Thursday has painted a disappointing economic climate for India particularly since Prime Minister Narendra Modi took control of governance at the Centre.
According to the report carried by Indian Express, investments in new projects by the corporate sector plummeted by 27 percent during the financial year ending in March 2015. This revelation has come days after PM Modi met the country’s top business minds urging them to take risks while investing in India.
The RBI report estimated that a total capital expenditure of Rs 1,93,300 crore (including bank finance, IPOs and GDR issues) would have been incurred by the companies in 2014-15, causing a sharp reduction of 27 per cent over the previous year.
Among the reasons listed by India’s central bank for slowdown, weak domestic economic activity, subdued corporate performance, low manufacturing growth and a sluggish credit expansion were what appear to have caused the decline in investment.
The investment planned for the 2015-16 looks even more disappointing. Going by the RBI report, the capital expenditure planned for the current fiscal year is estimated to be at just Rs 81,900 crore. This, if the companies stick to their investment plan.
There were, however, some good news for the current government as the RBI reports hailed lower inflation, lower fiscal and current account deficit and increase in foreign investment.
On lower manufacturing growth the RBI report said, “Though consumption demand remained weak, an upturn in the capital goods production seems underway, which could signal a revival in the investment cycle.”
The report also said that only one mega project( Rs 5000 crore in size) was undertaken during 2014-15 with more than 50 percent projects being less than rs 100 crore.
The states which benefited the most.
Nearly 65 percent of investment took place in major industries in Gujarat, Maharashtra, Odisha, Rajasthan, Andhra Pradesh and Chhattisgarh.
Last week, the commodities trading guru and hedge fund manager Jim Rogers had slammed PM Modi calling his government ‘all about talk and no action.’
Rogers said that he had sold his holdings in Indian companies and exited India because ‘the National Democratic Alliance government has failed to live up to investors’ expectations.”