A research study by Bank of Baroda reveals that investment activity within India Inc is not yet widespread but rather confined to specific areas. The report indicates uncertainty regarding whether investment has genuinely increased in the current year from a financing perspective.
The study notes that bond issuances or borrowings from banks by large corporations seem to be restrained. Bank credit growth to large industry stands at just 6.1% year-on-year, compared to an aggregate credit growth of 20% as of September. The report highlights that other sectors have experienced higher growth in credit, with 84% of total funds raised in the bond market for the first seven months coming from finance companies.
The data on investment intentions based on announcements is also deemed discouraging, lacking a broad-based positive trend. The majority of such announcements, 83%, originated from the transport, power, and chemicals sectors, with transport accounting for 57% of the share.
The study further analyzes the growth in fixed assets for a sample of 1,420 companies. While there is an increase in growth compared to the previous year, the growth rate is relatively subdued, with a 3.6% increase over March. On a year-on-year basis, growth was 7.9% for the year ending September 2023.
Certain sectors, such as infrastructure, media, and retailing, increased their fixed assets post the Covid-induced lockdown. Consumer durables witnessed higher-than-average growth, but some sectors like FMCG, hospitality, paper, electricals, non-ferrous metals, and logistics experienced growth lower than the sample average in September 2023.
In terms of growth over March, industries like FMCG, hospitality, and logistics, which were impacted by lockdowns in 2020 and 2021, displayed recovery. However, growth in fixed assets lagged in sectors like power, automobiles, banking, telecom, IT, healthcare, textiles, realty, plastic products, and trading, according to the Bank of Baroda report.
(With Agency Inputs)
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