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Signs of a revival in investments?

Signs of a revival in investments?

Ishan Bakshi
While the capital goods segment in the Index of Industrial Production (IIP) contracted 18 per cent in the first quarter of the current financial year, new data from the Department of Industrial Policy and Promotion (DIPP) suggest that the investment climate in the country may be on the cusp of improving.

According to DIPP data, complied by CARE, there has been 18.7 per cent increase in investment proposals in the first half of 2016 (January to June) over the previous year. In value terms though, the increase is a marginal 1.3 per cent. Taken together, the employment generation prospects of these proposals represent a 37 per cent increase over the corresponding period in the last year. The proposals include those filed under IEM (Industrial Entrepreneur Memorandum), LOI (Letter of intent) and DIL (Direct Industrial Licensing).

Electronic equipment and textiles together account for nearly half of these investments, up from roughly a fourth last year. This could be construed to mean that the investment cycle in these industries is gaining traction.

What is worrying is that excluding these two industries, there are few signs of continuity. "There are few signs of continuity in higher investment intentions in these years and it appears to be more industry specific. This is reflective of low demand conditions across industries, which combined with excess capacity has come in the way of higher investment demand," CARE noted. This suggests the recovery is still far from being broad-based.

But it is interesting to note, as CARE pointed out, that the ratio of total IEM implemented to intentions in 2016 (January to June) was higher at 38.3 per cent as compared to 14.6 per cent in 2015. According to this data of the Rs 66,431 crore IEMs implemented, more than half was in sugar (Rs 34,904 crore), followed by electrical equipment (Rs 5,956 crore), metals (Rs 3,824 crore), chemicals (Rs 3,614 crore) and cement (Rs 3,165 crore). This represents a sharp improvement over the previous years, signalling that project announcements are actually translating to action on the ground.
Signs of a revival in investments?
 

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First Published: Aug 25 2016 | 12:31 AM IST

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