Indian corporates are no longer depending on banks and financial institutions for project funding.
An internal Reserve Bank of India (RBI) study has pointed out that corporates have been investing "considerably large amounts in capital expenditure" before approaching institutions for assistance.
The paper, prepared by RBI's corporate studies division of the department of statistical analysts and computer services, has said that corporates are increasingly depending on their internal accruals for project funding. Even in those cases where funds are raised from the banking system, corporates are not accessing project loans. They are rolling over short-term facilities.
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For corporates, the share of expenditure incurred on projects has risen from 3.9 per cent in 1996-97 to eight per cent in 2000-01.
However, during 1999-2000, the share of expenditure on projects was considerably higher at 16.6 per cent. The study has pegged the aggregate capital expenditure during current fiscal at Rs 54,343 crore, virtually unchanged from the previous year's level.
It also cautioned that the realisation of projected investments in 2001-02 will entirely depend on the implementation of power projects since their share in aggregate investments was substantial.
The total project expenditure in 2001-02 for which sanctions were accorded up to 2000-01 was Rs 35,843 crore.
The RBI paper has said that the developments under the current economic situation will be dependent on the monsoon which "so far have not been unfavourable" and the industry outlook "which continues to be uncertain and of considerable concern". Development of favourable climate for investment will be dependent on the revival of the industry in the second half of the fiscal, it said.
The corporates seem to have been successful in reining in cost overruns. The cost over-run -- as a percentage of total project cost -- in fiscal 2001 was at 9.8 per cent in 19 projects compared with 13.3 per cent in 38 projects for the previous fiscal. New projects accounted for 77.1 per cent (Rs 53,533 crore) of the aggregate costs of projects in 2000-01 compared with 52.6 per cent (Rs 24,719 crore) in the previous fiscal.
Among the states, Gujarat occupied the top position for hosting the maximum number of projects accounting for 20.2 per cent of the total project cost or Rs 14,052 crore followed by Maharashtra (17.4 per cent), Tamil Nadu (16.5 per cent) and Andhra Pradesh (13.1 per cent).
Of the projects in fiscal 2001, the maximum investment was in infrastructure at 62.5 per cent compared with 42.9 per cent in the previous year. The share of the engineering industry decreased to 10.9 per cent compared with 18.9 per cent in the previous year.
Among infrastructure projects, power projects accounted for 30.6 per cent in 2000-01 compared with 19.9 per cent in the previous year, projects in roads, ports and storage were at 22.1 per cent (15.8 per cent in 1999-2000) and telecom at 9.8 per cent (7.3 per cent previous year).
The other industries which showed a drop in the overall projects costs were chemicals, mining and quarrying, cement, textiles, sugar, hotels and restaurants and construction.