How Realistic Is RBI’s Optimism On Private Capex Outlook? Systematix' Analysis

Systematix Research Report

Reserve Bank of India’s latest release on private capex outlook collates data from project approvals by banks, data on project funding through European Central Banks, and equity fund-raising by private companies concludes a material improvement in private capex outlook.

What does the RBI note observe?

1. Sustained pick-up in bank credit, rising capacity utilisation, improved business outlook and demand conditions and various government policy initiatives to support investment activities provided a conducive environment for the private corporates to undertake fresh investments.

2. The envisaged total cost of the projects financed by banks/financial institutions reached a new peak during FY23 since FY15.

3. Of the total capital investment during FY23, about 40% is expected to be spent in FY24.

4. A long-term analysis points to the usefulness of investment intentions of private corporates as an early indicator of the assessment of private capex. (We think what they mean is that it is useful but still not a perfect predictor)

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