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The Reserve Bank of India (RBI) on Wednesday said quick decision-making, reforms, improvement in the business climate and fast-tracking of projects were expected to boost investment this financial year, putting the Indian economy on the road to recovery.
“The decline in consumption and investment demand could be arrested in the coming years due to a decisive election mandate (in the Lok Sabha elections this year). This electoral verdict has bolstered investor confidence and raised expectations of a revival in the economy,” RBI said in its bulletin for September. It added considerable improvement in the business confidence index was already visible.
However, it said the lead indicators pointed to continuing sluggishness in domestic economic activity in the June quarter, adding the likelihood of a deficient monsoon could affect agricultural production.
To improve the aggregate capital expenditure in FY15, the private sector’s capital expenditure on new projects would have to be more than Rs 1,27,000 crore, the central bank said. The steps being taken to boost investor confidence showed this was achievable, it added.
Recent steps by RBI to incentivise banks to raise long-term funds for financing infrastructure loans were expected to make funds available for projects, especially those stuck or facing rough weather, RBI said.
The central bank’s analysis covered 481 projects, involving a total cost of Rs 1,34,000 crore, that had received sanctions for financial assistance from banks and financial institutions in 2013-14. It also included 563 projects raising about Rs 80,300 crore through external commercial borrowings and foreign currency convertible bonds, as well as 21 projects raising Rs 500 crore through equity issues.
Investment intentions seemed best in the power sector, followed by the metals & metal products, textiles, cement, construction and hotels & restaurants segments, the central bank said.
This year, sectors such as metals & metal products and telecom have seen a decline in new investment, while textiles recorded a rise, the central bank said.
