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A study by the RBI on India Inc’s investment plans doesn’t paint a pretty picture. Slowing growth, high inflation & limited headroom for further rate cuts has prompted India’s central bank to offer a subdued investment outlook for 2013-14.
The analysis based on cost of projects for which funds were raised from banks, financial institutions, IPOs & ECBs was published in the RBI’s September 2013 bulletin.
“Capital expenditure already planned to be spent in 2013-14 aggregated to Rs 1,620 bn. Even if companies adhere to their investment plan, to match the capex envisaged in 2012-13 (i.e., Rs 2,919 billion), the minimum capital expenditure of around Rs 1,299 billion needs to come from new investment intentions by the private corporate sector in 2013-14. Going by the assessment on date, capital expenditure of the above order does not appear to be feasible” the Reserve Bank said in its study.
With large projects in sectors like power and telecom getting stalled, capital expenditure that is already in the pipeline could also be lower this fiscal says the study.
While acknowledging government efforts to improve the investment climate the ‘results are yet to be visible’ assesses the central bank.
The bulletin also published an analysis of the consumer confidence survey conducted across 6 metros for the last four quarters. The survey showed the lowest reading in history (at 101.7) in terms of the CSI (Current Situation Index), even as future expectations showed improvement.
Majority of respondents polled said they were economically worse off as compared to a year ago. But data for the 1st quarter of 2013 in isolation, showed improvement in outlook for both current and future economic conditions.
28% respondents said they expect household circumstances in the next year to improve, an increase from the 22-23% figure in the last 3 rounds. “‘Salary and business income’ and ‘prices’ are the two major factors that have in?uenced the respondents’ perceptions on household circumstances across all the survey rounds” the survey states.
Respondents also exuded optimism regarding increase in income a year down the line, even though the net response on current income perceptions was at its lowest across the survey rounds. 3/4th of the respondents reported that their current spending has increased compared to a year ago as a result of higher cost of consumer goods & services and stagnant incomes, but less than 20% said they would spend on making major purchases like cars & consumer goods. 61 – 73% of respondents clearly stated that it is not a good time for any major expenditure, even as a fifth of the polled felt it was a good time to buy gold.
The survey also showed that 42-51% of people polled were more optimistic about future employment prospects than they were about the current jobs scenario.
