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Last Updated : Mar 13, 2019 02:19 PM IST | Source:

100-word take | A slow capex recovery has taken root

Improved capacity utilisation…provides a lead indication of a “reinvigoration of investment activity,” says RBI staff paper.

A paper from Reserve Bank of India staff adds further evidence that an investment demand recovery is underway, albeit slowly. We knew that from the GDP numbers. For the first nine months of the current fiscal year, gross fixed capital formation showed 10.8 percent growth on the back of 8.4 percent growth in 9MFY18.

The RBI paper, which analyses projects which had raised financing from banks, financial institutions, external commercial borrowings and the equities market,  says project sanctions total Rs 1.16 lakh crore in the first half of FY19. It further says that for pipeline projects sanctioned in the previous years, the planned capex is Rs 79,200 in 2018-19 compared to Rs 68,500 crore a year ago.

It sums up like this: Going forward, investment activity is expected to gather pace, benefiting from the pipeline projects lined up by private companies. Improved capacity utilisation…provides a lead indication of a “reinvigoration of investment activity.” Perhaps, that’s why the BSE capital goods index has outperformed the benchmark indices in the last 6 months.

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First Published on Mar 13, 2019 02:19 pm
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