Mumbai: Contrary to the widely-voiced concerns, a report has showed that although the private sector will wait for the outcome of the forthcoming elections, 2019 may finally see the revival of investments.
Private sector investments have been picking up in sectors like chemicals and electrical equipment, coupled with an increase in capacity utilisation, says the economists at HDFC Bank, adding though these are not large capex and we are not yet there to call it as a full-blown revival.”
“As the popular narrative seems to suggest, investments are not all a government-led story anymore. Private investments are also showing signs of genuine traction, across a number of sectors like electrical equipment and chemicals,” said the report.
The pick-up is not “full-throttle”, the report admitted, but hoped that 2019 may well be the “year of investments, finally”.
It can be noted that in the past few years, the government has led in investments across sectors as private sector was largely dormant.
The increase in capacity utilisation rates into the 70 per cent range had increased expectations of a revival in investments, but some analysts had opined that the private sector will wait for the outcome of the elections.
The report said gross fixed capital formation, which is an indicator of total investments in the economy, grew at 12.2 percent in 2018-19 according to the first advance estimate by the CSO, and is the highest rate since the 2008 financial crisis and much higher than the average 5.4 per cent achieved in the last five fiscals.
The share of private investments to nominal GDP has also increased to 12 per cent in 2016-17 from 10.8 per cent in 2014-15, it said.
Private sector investments have increased in manufacturing, but fallen in mining, electricity and gas, construction and transport, storage and communication sectors.
The report also pointed out to a rise in production of capital goods, pick up in capacity utilisation which has touched 80 per cent mark in some sectors and rise in credit growth to illustrate the
increasing importance of private sector activity when it comes to investments.
The report draws from the DIPP data to understand the pockets of revival.
In the first 11 months of 2018, 816 investment proposals were implemented as against 571 for the same period in 2017, it said, adding it is much higher when counted by value of investments at '2.14 lakh crore as against '71,400 crore last year.
The most significant increase have been in electrical equipments, chemicals, cement, textiles and fertilisers, the report said.
“Investments are supporting growth. More importantly, the burden doesn't lie on the government anymore. The private sector is showing signs of traction as well,” the report said, adding a faster resolution of bad loans and deleveraging of the corporate balance sheets remains essential to make the investment pickup broad-based.
