Mumbai: Indian private companies will invest Rs1.73 trillion 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, RBI said the downside risks to corporate profitability had risen due to higher global oil prices, and rising interest rates, input and wage costs.
Slowdown ahead?Development work under way at the Indira Gandhi International Airport in New Delhi. Infrastructure projects accounted for nearly half of the total fund-raising plans in 2007-08. (Photograph: Madhu Kapparath / Mint)
“With prospects of decelerating 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. RBI expects the economy to expand by around 8% in the year to March 2009 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, Rs931 crore 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 that 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, four roads and water management projects, and six 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.
The number of projects costing Rs500 crore, 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 Rs62,442 crore, followed by Maharashtra with 12.7% and Orissa with 10.9%.
Offshore borrowings were at Rs33,068 crore in 2007-08 against Rs51,331 crore in 2006-07.