Mumbai: Indian private companies will invest $40 billion in fresh projects in 2008-09, a 30% decline from Rs2.45 trillion in 2007-08, the Reserve Bank of India (RBI) said in a recent study.
In an article titled “Corporate Investment: Growth in 2007-08 and Prospects for 2008-09” in its August bulletin, it said downside risks to corporate profitability has risen due to higher global oil prices, rising interest rates, input and wage costs.
“With prospects of declerating pace in growth of domestic and global economy, environment for the fixed investments due to its cyclical nature could become less conducive,” the Department of Statistics and Information Management at the bank said.
Investment is a key indicator of growth plans by companies and fresh investments is essential for sustaining economic growth. The central bank expects the economy to expand by around 8% in 2008-09 on the back of an 8.8% average growth in the last five years.
In 2007-08, 910 projects were sanctioned at a total cost of Rs2.84 trillion, Rs9.31 billion higher than Rs2.83 trillion for 1,054 projects in 2006-07.
The difference in the two numbers cited for 2007-08 (Rs2.45 trillion and Rs2.84 trillion) is to avoid multiple counting and to take into account firms which have raised funds via offshore loans and fresh equity sales.
Infrastructure projects accounted for nearly half of the total fund raising plans in 2007-08, up from 36% in 2006-07. Nearly 72% of the total investments in infrastructure was in 71 power projects followed by 52 technology parks and special economic zones.
Nine telecom projects, 4 roads and water management projects and 6 ports and airports accounted for the rest of the projects in the infrastructure sector.
“Metals and metal products with a 16% share, coke and petroleum with a 6% share and cement with 4.9% accounted for a big chunk of fresh projects,” the study said.
Number of projects costing Rs5 billion or more rose to 98 in 2007-08, from 88 in 2006-07.
Among the states, Gujarat took the first place with 22% of the total investments with 100 fresh projects at a total investment of Rs624.42 billion followed by Maharastra with 12.7% and Orissa with 10.9 percent.
Offshore borrowings were at Rs330.68 billion in 2007-08 compared with Rs513.31 billion in 2006-07.