RBI policy meet: Upturn in private capex cycle becoming broad based, says governor Das

Upturn in private capex cycle becoming broad-based: RBI Guv

RBI Governor Shaktikanta Das sounded optimistic on the private capital expenditure, an area that has remained a concern for the economy.

“The prospects of investment activity remain bright owing to upturn in the private capex cycle becoming steadily broad-based; persisting and robust government capital expenditure; healthy balance sheets of banks and corporates; rising capacity utilisation and strengthening business optimism as reflected in our surveys,” the RBI governor said on April 5, announcing the outcome of the monetary policy committee (MPC) meeting.

The MPC left the key repo rate unchanged at 6.5 percent for the seventh time in a row, in line with the market expectations, with its focus firmly on bringing inflation down. It also left the stance unchanged as withdrawal of accommodation. The decisions were takes with a 5:1 majority.

Several sectors are seeing improvement in investment activities such as food processing, beverages and tobacco, textiles, chemicals and chemical products, cement and cement products, iron and steel, electronics, construction, telecommunications, roads and railways, the RBI said.

Das said resilience in cement production, together with strong growth in steel consumption and production and import of capital goods, augurs well for the investment cycle.

Steel consumption rose by 9.7 percent, while cement production jumped by 7.9 percent in January-February, data shows. Imports of capital goods expanded by 6.9 percent during January-February 2024, while capital goods production increased by 4.1 percent in January 2024.

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“Improving global growth and trade prospects, coupled with our rising integration in global supply chains, are expected to propel external demand for goods and services,” the governor said.

Industrial activity continues to witness momentum, with the purchasing managers’ index (PMI) for manufacturing displaying a sustained expansion in February-March, touching a 16-year high in March.

PMI for manufacturing strengthened to 59.1 in March 2024 from 56.9 in February.

The total flow of resources to the commercial sector from banks and other sources was at Rs 31.2 lakh crore in 2023-24, significantly higher than previous year's Rs 26.4 lakh crore.

“External demand improved in February with exports registering double digit expansion. Trade deficit, however, widened in February as imports also accelerated,” he added.

To be sure, the governor cautioned that headwinds from protracted geopolitical tensions and increasing disruptions in trade routes pose risks to the outlook for the Indian economy.