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'Investment recovery underway, capex may grow by 8% in FY14'

Last Updated: Thursday, May 9, 2013 - 23:41

Mumbai: Financial services major Credit Suisse on Thursday said there are encouraging signs of recovery in the investment front, with an expected 8 percent growth in capital expenditure in the current fiscal.

"Contrary to conventional wisdom, we note evidence that an investment recovery is underway. The fundamentals suggest the pick-up will be both reasonably robust and sustainable," it said in a report.

The report sees a likely uptick to the tune of 8 percent this fiscal. "The real gross fixed capital formation is likely to expand by around 8 percent in the current financial year and 12 percent in FY15."

Giving the rationale behind the optimism, Credit Suisse Chief Economist Robert Prior-Wandesforde said while interest rate variables, oil prices, export growth and equity market are becoming supportive, the Cabinet Committee on Investment may succeed in unlocking some stalled projects.

The comments come even as projects worth nearly Rs 10 trillion are stuck at various stages. However, after the Committee was formed, the Government has cleared several projects in the recent past.

Maintaining that the popular perception of no investment pick-up in the domestic economy is a myth, he said: "One of the strongest consensus views concerning the economy is that capital expenditure is flat on its back and highly likely to remain so for the foreseeable future.

"We disagree. Not only have the fundamentals for a pick-up in capital spending improved but we note some evidence to suggest that a recovery is already underway."

Prior-Wandesforde noted that there is recovery in investment as evident from the recent data.

"It may have gone largely unnoticed, but the December quarter GDP release showed real gross fixed capital formation (GFCF) growing 6.0 percent year-on-year - up from 4.6 percent in the June quarter and the strongest since June quarter of 2011."

The report said there is little evidence to suggest that companies may postpone investment due to the forthcoming general elections.


First Published: Thursday, May 9, 2013 - 23:41
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