Investment on cusp of revival as capex rises

RBI Governor Raghuram Rajan today said green shoots are visible in the investment climate, but refrained from commenting on the new CSO series on economic growth numbers.
"Stalled projects are coming down, investment intentions are picking up and I think we are starting to see the beginnings of an investment cycle," Rajan told researchers and analysts in a post-policy conference call.
He cautioned however that these are the early signs and one should not start celebrating.
Data put out by Centre for Monitoring Indian Economy (CMIE) yesterday also point out to a revival in investment growth, he added.
As the country kick-starts on this growth process, the government will have to be alert on issues on fuelling the expansion with sufficient funding options, Rajan said.

"We will certainly be alert and I think the government will also be alert to capital needs of PSU banks. There is some room for the banks, especially the state-run ones to access the markets to raise capital from the market over and above what they can do from the government," he said, adding that there is an "active discussion" going on in this aspect.

Talking about the new GDP series which the Central Statistical Organisation (CSO) had released recently, Rajan said he is still trying to understand the new series.
"We are somewhat constrained to project growth based on new numbers which we do not understand as well as we thought we understood the old numbers. That is why it may seem that... determining potential growth is not that easy with such a short series of data and that creates a little bit of noise," he said, adding that the growth is slightly below potential.

RBI executive director in-charge of monetary policy, M D Patra said for the purpose of monetary policy, it is very important to know the level of potential output as it tells what the potential growth is.
"Potential output tells you where we are on the business cycle, and therefore how to position policy.
"Potential output is always difficult to measure and when you have just 16 quarters of data, it becomes even more difficult," he said.