Investment by private cos may drop by 35% in FY13: Crisil

Report says the drop will be led by sectors like cement, textiles, telecom and automobiles

Investment by private companies is expected to decline by a whopping Rs 72,000 crore or 35% from planned capital expenditure this fiscal due to a host of issues like land acquisition and fuel linkages, a report by ratings agency Crisil has said.

Companies had planned an initial capex of Rs 2.7 lakh crore this fiscal but a good portion of that will remain only in paper. This southward-ho in the capex will be led by companies in the sectors like cement, textiles, telecom and automobiles, says the Crisil report.

"Investment by private sector companies in our survey is expected to decline by nearly Rs 72,000 crore or 35% this fiscal," Crisil managing director and chief executive Roopa Kudva said.

"Since the private sector accounts for three-fourths of GDP and over 90% of manufacturing output, revival of the private sector investment is critical to lift the sagging economic growth," Kudva said.

According to sector-wise analysis, capital investment in cement is expected to decline by 75% decline, textiles by 71%, pharmaceuticals by 51%, telecom by 35%. The capex in FMCGs may drop by 34%, automobiles by 26%, and oil & gas by 19%.

 "A majority of the companies surveyed have indicated that policy issues such as land acquisition, mining policy, fuel linkages and spectrum pricing as well as delays in project clearances are impacting investments," Crisil Research President Mukesh Agarwal said.

"To spur investments, the government will have to play the role of an enabler by addressing these bottlenecks," he said.

The only green shoots come from other infra which include airports, ports roads etc which are set to growth 17%, IT & ITeS to growth by 25% and metals by a higher 31%.

The poll was conducted by Crisil among 200 companies, 170 of them private sector ones. At 35% capex, the decline in investments by the private sector will be the lowest in the past four years and comes on top of a 4% decline last fiscal.