Not quite correct

This refers to “Capex spends may drop by 30% in FY09” (September 8). The article refers to the corporate investment study published in the August issue of the RBI Bulletin and draws some erroneous conclusions.

First, the analyst seems to have juxtaposed the data of two independent studies with each other — that done by the RBI and his own study based on 648 listed companies. Second, the news article says, “An RBI study estimates that India’s Inc’s capex will touch Rs 1,73,173 crore in 2008-2009, significantly lower than the Rs 2,45,107 crore raised by companies in 2007-2008”. It is incorrect to attribute a negative tone to the RBI study.

The RBI study in its section on “Prospects for 2008-09” merely states that: “… If the aggregate capital expenditure (by companies) in 2008-09 were to surpass the level intended for the year 2007-08 (i.e. Rs 2,45,107 crore envisaged collectively by companies approaching banks/FIs or issuing domestic equity capital or contracting ECBs), the fresh planned capital expenditure in 2008-09 must be above Rs 71,934 crore in 2008-2009”. The author wrongly interprets this observation made in the RBI study.

Simply speaking, the RBI study records that corporates have indicated investments of Rs 1,73,173 crore in 2008-2009 from projects envisaged till March 2008. This includes the investments of companies which raised funds through banks/FIs (Rs 1,48,350 crore), ECBs (Rs 19,748 crore) and public/rights issues (Rs 5,075 crore). However, this does not include estimates of fresh capital expenditure to be incurred by corporates in 2008-09.

Stating that to surpass the level of capital expenditure of 2007-08 of Rs 2,45,107 crore, corporates will need to invest more than Rs 71,934 crore in 2008-09, the study concludes that “the turnaround in corporate investment which began in 2002-2003 and maintained healthy position thereafter, is expected to be sustained in 2008-2009”.

Furthermore, the author observes that “Capital inflows into India could drop to anywhere between Rs 132,000 crore and Rs 176,000 crore. The RBI pegs the figure at Rs 148,350 crore”. The study, however, discusses only capital investment intentions for 2008-2009. Perhaps the author has equated capital expenditure with capital inflows, which is erroneous.

Alpana Killawala, Chief General Manager, Reserve Bank of India

The error is regretted—Editor

Bad planning

Despite rapidly increasing in number, townships continue to suffer from bad planning as they are getting disconnected to the area they occupy. Thus, our satellite townships, expected to be a solution of decongesting cities, are beginning to burst at their seams. Basic needs like water, electricity, sanitation and security continue to suffer as concerned authorities neglect these townships. Concerned authorities should not to allow townships to become islands of dryness, darkness, lawlessness and filth.

R N Lakhotia, New Delhi

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