Mumbai: Indian companies may invest more funds to add on to existing capacities in 2007/08 compared to last year as demand conditions remain strong forcing companies to operate close to their optimal levels, a Reserve Bank of India study said.
The central bank in its August bulletin said, though the quantum of corporate investments was likely to increase in 2007/08, the pace of growth may slow down from the previous year due to the cylical nature of such demand.
“Continued momentum in industrial production coupled with continued buoyancy in export growth as observed in the first two months of this year bodes well with the conducive investment demand,” it said.
It estimates India’s growth at 8.5% for 2007/08 -- mostly in line with the 8.6% growth in the past four years. An expanding economy has increased incomes, spurring demand for goods and services in Asia’s third-biggest economy.
But downside risks in the form of rising interest rates, possible currency appreciation and wage cost pressures in many industries may dent demand, it said.
According to the survey, 1,054 companies had projects in the pipeline totaling Rs2.83 trillion in 2006/07, more than double the Rs1.31 trillion in 2005/06, reflecting buoyant economic conditions.
The infrastructure sector cornered more than one-third of the total fresh investment amounting to Rs1.02 trillion and half of such investments flowed into power projects.
Gujarat cornered 26% of the total proposed investments with Andhra Pradesh and Maharashtra following behind.