Pvt sector capex seen dn 11% in FY16; awaits public investment

Private sector is likely to remain reluctant to kick-start investment cycle - with its capex seen falling 11 per cent in 2015-16, and the onus is on the government to do "initial heavy lifting" through public investments, credit rating agency Crisil said today.
"Private sector won't kick-start investment cycle. Listed, public and private sector companies from key sectors such as infrastructure, energy, metals, cement, auto, pharma and textiles showed a 4 per cent decline in capex plans for 2015-16.
"Even more bothersome was an 11 per cent year-on-year decline in the capex plans of private-sector companies polled," Crisil said in a note based on survey.

This will follow already subdued spending expected in 2014-15, it said.
"The message coming through is crystal clear; as things stand, there is only one way to kick-start the all-important investment cycle, and that is through public investment. The onus is on government to do initial heavy lifting," said Raman Uberoi, President, Ratings, Crisil.
About 90 per cent of the companies were of opinion that sentiment has improved on ground and capex should begin to recover by next fiscal, Crisil said, adding that ironically, near-term plans for their own companies belied this optimism.

"Infrastructure and energy are expected to see a small increase in capex, but it will be more than offset by a decline in manufacturing sector," the survey showed.

Corporates are looking for better visibility in terms of sharp improvement in demand, which seems to be the real reason behind their hesitation to commit larger monies, said Crisil Research Senior Director Prasad Koparkar.
"In such a scenario, ability of government to kick-start investments through fiscal measures, especially additional elbow room afforded by falling crude prices is crucial because that can initiate demand cycle," he added.
Spending on roads, urban infrastructure and railways is crucial as they have significant multiplier effect for creating demand for steel, cement, capital goods and commercial vehicles and spurring investments in manufacturing space as well, Crisil said.

The survey was based on a sample of 192 listed, public and private firms. Polled firms accounted for about 45 per cent of capex undertaken by all NSE listed companies, except banking, financial services and insurance sector in 2013-14, it added.