India Inc Capex to Fall 4% in FY16: Crisil

Mumbai: A majority of Indian corporates see capital investment picking up next fiscal year but their own plans show a decline in investments in FY16, led by the private sector companies, according to Crisil.

"About 90 per cent of corporate India expects a pick-up in overall capital investments next fiscal, but their own capital investment plans actually indicate a 4 per cent decline, while the capex by the private companies is likely to decline more at 11 per cent," Crisil senior director Prasad Koparkar told reporters here on Tuesday.

The finding is based on a survey of 192 companies, which comprise about 45 per cent capex undertaken by all NSE-listed firms, except those in the banking, financial services and insurance sectors, in 2013-14.

Mr Koparkar said capex by public sector companies will pick up marginally, though a complete turnaround in India Inc's investment cycle is unlikely anytime soon.

Over 80 per cent capex is expected to come from oil and gas, power and roads and metals sectors in FY16. Till there is improvement in demand, private sector will prefer to wait than intrepidly commit more skin, Crisil said in its report based on the survey.

"In such a scenario, the ability of the government to kick-start investments through fiscal measures, especially given the additional elbow room afforded by falling crude prices, is crucial," Mr Koparkar said.

"We believe quick resolution of land-related issues and other on-ground factors impacting stuck projects, significant thrust to and innovative financing schemes for renewables, and specific provisions to boost investment in manufacturing as part of 'make in India' programme are the things that can make a difference," he added.

He said de-bottlenecking steps taken by the government and tailwinds from the crash in crude oil prices have infused sanguinity into the economy, even pushing growth up mildly.

"With inflation hovering inside the RBI target and CAD (current account deficit) reined in, we are truly a bright spot among emerging markets," Mr Koparkar said.

He, however, also said domestic investments aren't picking up.

"Without an upturn in capital investments, without job creation, without putting more money in people's hands, and without expanding capacities to meet future demand, it is hard to see the current pace of economic growth increasing."

Crisil also separately conducted an analysis of 203 large companies to estimate their ability to fund capex plans for FY16.

"Based on assessment of indebtedness of companies (total outside liabilities/tangible networth), 72 per cent have high ability to fund their planned capex, 8 per cent moderate ability and 20 percent have low ability," it said.