Has the investment cycle of our economy finally turned up?
₹6.72 trillion were higher than last year’s ₹6.37 trillion. While this looks encouraging, 80% has been raised by financial companies, compared with 74% last year. So non-financial firms have raised just ₹1.34 trillion.
Equity issuances for the first 10 months at ₹1.51 trillion are higher, too, than last year’s ₹1.11 trillion, which indicates investment activity. Bank credit growth so far, till 12 January, has been marginally lower at 16.3%. However, data till December shows that this has been driven mainly by personal loans that have grown by 28.5% and lending to the services sector (up 23%).
Some comfort may be drawn from the fact that growth in credit to manufacturing has held up at almost the same rate as last year, 8.6%. In fact, large industry, which was a laggard, has grown at a stable rate of 7%, driven by categories like food processing, textiles, chemicals, glass, etc. The foreign direct investment (FDI) picture is just about stable.
For the first eight months of the year, gross inflows have been lower at $47 billion, compared with $49 billion last year. FDI is taken as another driver of domestic investment as these inflows result in capital spending. External commercial borrowing (ECB) approvals have also been higher in this fiscal year at $36 billion, a jump from around $20 billion in 2022-23 (till December).
The overall picture is mixed. There are some signs of support for the crowd-in hypothesis. The flow of funds is more to sectors linked with infrastructure.
Another way of looking at investment is in terms of intention. For this, CMIE data captures new investment announcements across the spectrum. It can be argued that if money is being sourced from anywhere to invest, it should translate into project
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