Investment cycle giving showing of recovery: StanChart

After a long "dormancy", the country's investment cycle is showing signs of recovery and to sustain this trend the government needs to step in as "investor and enabler", a Standard Chartered report said on Friday. "Our analysis of the recent Centre for Monitoring Indian Economy (CMIE) data, shows initial signs of recovery, particularly in infrastructure investment, after years of dormancy," Standard Chartered said in a research note adding that "we expect the investment cycle to recover in FY16, albeit at a gradual pace." According to the global financial services major, an investment recovery seems to have begun as investment remained on an upward trend in the first quarter of this fiscal year. The global brokerage said reviving the investment cycle is crucial to put India's growth on a higher and more sustainable trajectory and in order to support the recovery, government has to play the "dual role of investor and enabler".

The government is driving the current investment recovery, while private-sector investment remains soft, it said. The report noted that recovery in private-sector investment will be gradual and halting given high corporate -sector leverage, a weak banking sector, and low capacity utilisation in sectors to which the private sector has high exposure. "Since these issues will take time to resolve, a pick-up in private-sector investment is still two to four quarters away, in our view. We expect India's investment growth to improve to 7.2 percent in FY16 from 4.6 percent in FY15," the report said. As per the report, land acquisition hurdles, lack of funding, weak and environmental clearances are key bottlenecks to investment. "The impact of global developments on domestic investment also needs to be monitored.

The recent sharp decline in global metal prices, for example, is likely to curb private-sector investment in the metal sector, delaying its recovery," the report added.