Investment climate in India has improved, govt capex picking up: CARE

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The investment climate has seen signs of a pick-up, based on factors including improved gross fixed capital formation and higher government expenditure, CARE ratings said in a report. Gross fixed capital formation has been at 29 per cent in the first half of FY19. It was at 28.3 per cent in the first half of FY18. The government too has been picking up on its spending with sectors like infrastructure, housing and defence getting the bulk of capital.

Capex picking up

Overall capex of the government in the first 7 months of the year was Rs 1.77 trillion as against Rs 1.62 trillion last year, said the report. Capacity utilisation has been picking up in recent times. However, it had a dip in the last available quarter and would need watching, according to CARE. Lower capacity utilisation can disincentives companies’ new investments.

Mixed trend

Data from capex tracker Centre for Monitoring Indian Economy (CMIE) shows a mixed trend. New projects have declined. This is also true of completed projects. However, there has been an improvement in projects revived. Implementation stalled projects have also fallen.

What to watch out for

Maintenance capex by government and capacity utilisation rates would be among important factors to watch how the investment cycle moves in the days ahead, the report said.

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