Capital expenditure (capex) by Indian corporate houses is expected to dip by 14 per cent to Rs 2.7 lakh crore this fiscal compared to last year, according to a study conducted on 200 companies by Crisil Research.
The 200 companies polled account for 70 per cent of the market capitalisation of all companies in the S&P CNX 500 (excluding banking and financial services companies). About 170 private companies in the survey revealed that they will trim their planned investment by Rs 720 billion or 35 per cent this fiscal due to slowing economy.
Moreover, close to half of those polled indicated that they have no intention of investing in new projects this year. Over 70 per cent of those polled also indicated that policy logjam was amongst the top two factors responsible for the current slowdown in investments.
A large part of the capex was deferred in sectors such as metals and infrastructure (roads, ports and power). In fact, 30 private sector companies disclosed that they have deferred or shelved projects aggregating to Rs 350 billion, of which infrastructure and metals account for over 70 per cent.
The sectors where capex is expected to decline significantly are cement, textiles, telecom and automobiles. Close to half of the companies also indicated that they have no plans of starting any new projects in 2012-13.
Ms Roopa Kudva, Managing Director and CEO, Crisil said since the private sector accounts for three-fourth of India’s GDP and over 90 per cent of its manufacturing output, the revival of private sector investment is critical to lift the sagging economic growth.
A majority of the companies surveyed have indicated that policy issues such as land acquisition, mining policy, fuel linkages and spectrum pricing as well as delays in project clearances are impacting investments.
“To spur investments, the government will have to play the role of an enabler by addressing these bottlenecks,” said Mr Mukesh Agarwal, President, Crisil Research.