CAPITAL EXPENDITURE INVESTMENT BY CORPORATE INDIA LIKELY TO OVERSHOOT LAST YEAR’S LEVEL OF Rs. 3, 44,633 CRORE:

CAPITAL EXPENDITURE INVESTMENT BY CORPORATE INDIA LIKELY TO OVERSHOOT LAST YEAR’S LEVEL OF Rs. 3, 44,633 CRORE:

As per RBI study Capital expenditure investment by the Corporate India is likely to overshoot last year’s level of Rs. 3,44,633 Crore.

In the latest monthly bulletin of RBI stated that the positive effect of improved outlook of domestic demand, increasing capacity utilization and rebound in profits besides comfortable credit conditions on investment decisions indicate that the corporate were expected to come up with at least a new investment intentions of around Rs.77,264 Crore to meet the growing demand. This along with the capital expenditure planned for the year should match the 2009-10 level, the study says.

Further report said the capital expenditure that might have been incurred in 2009-10 of all companies covered in the study worked out to a substantial amount of Rs. 344,633 Crore, of which Rs. 182,134 Crore was envisaged by 1,070 new projects added to the database by financial year 2009-10 .

Capital expenditure planned to be spent in financial year 2010-11 aggregated to Rs. 267,369 Crore. If the companies did not defer the investment decisions and adhere to their investment plans this pipeline investment was expected to maintain the momentum of investment during the year.

As per the RBI despite the uncertain economic outlook occurring largely in the second half of 2008-09, the corporate appeared to have continued with their optimistic investment plan on the basis of robust demand conditions of earlier years.

Though there were a number of projects that reported delay or scaling back, the information with banks on projects coming up for assistance suggested the rise in capital expenditure by 35.7 % in 2008-09. The intentions were seemed to have been largely revised in next year as reflected in a lower seven per cent rise in envisaged capital investment in 2009-10 despite rebound in key economic parameters.

The RBI report said a subdued bank credit growth during large part of 2009-10 was to some extent offset by higher funds mobilization through IPOs, private placements and mutual funds. Expansion in industrial production, exports and corporate profits, particularly in the second half of last fiscal reflected a broad based recovery in demand conditions.

With the strength in credit conditions and business confidence, the companies’ investment intentions surged further, it said, adding that led by rise in large sized projects, the total envisaged cost of projects sanctioned assistance by banks and financial institutions in last fiscal Rs. 556,011 Crore far surpassed the previous high Rs. 333,039 Crore in 2008-09.

Deepak Chaudhary
B.A.LL.B., CS Executive
Corporate Lawyer