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Business News » India News

'New investment proposals recover from a decade low in March quarter'

The Reserve Bank of India (RBI) in its first bi-monthly monetary policy document for the current fiscal year said that new investment proposals have recovered in the fourth quarter from its decadal low level at the end of third quarter. 

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'New investment proposals recover from a decade low in March quarter'
RBI. Representational image. Pic: Reuters.
Written By: ZeeBiz WebTeam
Updated: Fri, Apr 07, 2017
11:32 am
Mumbai, ZeeBiz WebDesk
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The Reserve Bank of India (RBI) in its first bi-monthly monetary policy document for the current fiscal year said that new investment proposals have recovered in the fourth quarter from its decadal low level at the end of third quarter. 

RBI quoted Centre for Monitoring Indian Economy (CMIE) for this data. 

New investment proposals capture the future pace of investment activity in the country. 

RBI said, "The new investment projects increased to Rs 2.57 lakh crore in Q4 as against an average of Rs 2.16 lakh crore in the preceding nine quarters."

It further said, "The value of stalled projects decreased by 51% during the quarter, mainly accounted for by government sector projects."

RBI, however, said that the problem of stalled projects continues mainly because of lack of environmental and non-environmental clearances.

India's gross fixed capital formation (GFCF) turned around in the third quarter (October 2016 to December 2016) and accelerated in the fourth quarter, data show. The turnaround came after a year of sharp deceleration or contraction, RBI said. 

RBI said, "On the basis of lead indicators, this reversal in investment demand in spite of demonetisation effects can be explained by the pick-up in capital goods imports and moderation in the pace of contraction in domestic capital goods production as also improvement in profits of software companies."

It cautioned, "Nonetheless, it may be premature to interpret these proximate developments as green shoots of durable revival of investment demand."

"A wider scan shows that capex spending, especially in large brownfield projects in sectors such as iron and steel, construction, textiles and power, remains weak amidst an environment of uncertainty surrounding growth, both global and domestic, and over-indebtedness as well as excess capacity in many sectors," RBI said. 

 

GFCF's positive growth in Q3:2016-17 after three consecutive quarters of contraction posed the question whether the upturn indicates a turning point in the investment cycle and what are the implications for growth?

RBI said, "Markov-switching probabilities suggest that the inflexion point in the investment cycle to a higher growth regime has still not materialised. Similar exercise on GDP growth rates also does not suggest any turnaround."

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TAGS:
Indian economyEconomyIndian GDPGDPGross fixed capital formationCMIENew Investment ProposalsArun JaitleyUrjit Patel
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