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Indian Economy: Crisil predicts a revival of the private investment cycle in more than a decade

Credit rating agencies predict that India’s private investment cycle is set to recover in more than a decade due to government schemes, capital investment in sectors such as cement and metals, and digitization. He said accommodative monetary policy, global liquidity and low interest rates would also help revive investment, according to rating agencies.

“Private sector fixed investment seems to be entering a whole new cycle after a temporary suspension of the pandemic. This time it is armed with a new set of growth drivers. First, PLI (linked to production). Incentive schemes) can drive growth in fixed investment in new era sectors, primarily dependent on imports (communication equipment, mobile, IT hardware, batteries, etc.), then utilization levels Leading metal and cement companies with high and sound balance sheets will continue their fixed investment plans (Brownfield and Greenfield in the short term, in the medium to long term). ”

The new capital investment cycle is expected to be similar to that seen in the first decade of the century (2000s).

Rating agencies are the second researchers to predict India’s economic recovery within a week. Jeffreys, a U.S.-based vocalist, said last week that the Indian economy will grow repeatedly from 2003 to 2010, driven by corporate leverage and profitability, lower bank bad assets (NPA) and housing demand. He said he was ready.

Crisil has three key indicators of recovery: the submission of an Industrial Entrepreneurial Memorandum of Understanding (IEM) to the government, the pace of environmental approval, and foreign direct investment (FDI) investment that has already exceeded pre-pandemic levels. Cited a surge in. ..

Companies with revenues in excess of Rs 25 billion are required to submit their capital investment intent when the IEM submits a Greenfield / Brownfield plant to the government. Crisil estimates that companies plan to invest Rs 700 million in capital expenditures in 2021, the highest since at least 2012.

Environmental clearance is also accelerating, with a 36% decrease from 2019 to 2020 and a potential increase of 55% to 65% from 2020 to 2021.

FDI investment is also gaining momentum, more than doubling in the first quarter after a 19% increase in the fiscal year ended March 2021.

“The new capital investment cycle is relatively clear in some respects compared to the previous cycle. First, in the asset-rich sectors such as metals, cement and mining, the existing sites (Brownfield capital investment) are large. We see more localized investments led by companies, while those with less assets such as pharmaceuticals, telecommunications equipment, mobiles and electronics are more driven by PLI and supply chain diversification. Greenfield capital investment is expected, and the increasing importance of environmental, social and governance (ESG) compliance will drive green capital investment, especially for the energy transition of the core industrial sector. ”

Crisil’s government-led PLI scheme will increase total industrial fixed investment by a factor of 1.3 over fiscal year 2022-2024 compared to fiscal year 2018-2020, led by sectors such as batteries, automotive and specialty steel 2.2. We anticipate that it could generate a capital investment of 10,000 rupees.

Improving productivity and quality through digitization and automation also helps with investment. “In the pandemic, the need for digitalization is becoming more and more urgent. Thanks to such evolving technology, major players like Siemens and ABB are in a pandemic-influenced year. Despite this, we have recorded healthy revenue and purchase order growth in the last three quarters. Growth of players in the areas of electricity, automation, engineering and IT / ITeS, as well as new era sectors such as data centers. “Promote Crisil,” said Crisil.

However, the new capital investment cycle will depend on government support and policy measures, and their implementation, rating agencies said.

Indian Economy: Crisil predicts a revival of the private investment cycle in more than a decade

Source link Indian Economy: Crisil predicts a revival of the private investment cycle in more than a decade

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