According to CMIE, 74 new projects were announced in the power sector and 36 projects in transport services, particularly in the shipping and road sectors
The investment cycle is expected to see a turn around with the number of projects going up, as the government and the private sector announce a slew of them involving substantial capital expenditure.
According to the Centre for Monitoring the Indian Economy (CMIE), new investment projects announced rose to 7.3% of GDP in the third quarter (July-September) of 2014 from 3.2% in the second quarter. On a four-quarter rolling sum basis, investment rose to 4.8% of GDP from 4%, with the rise driven almost equally by the government and private sectors.
MS Raghavan, chairman and managing director, IDBI Bank, said that many projects are on the drawing board but has not translated into credit proposals. "For example, in the power sector, especially the transmission sector, there is a good activity of pooling mechanism for payment. In road sector as well, there are some projects that are expected to come on stream. Even manufacturing will pick up. The investment cycle seems to be turning around."
Nomura Financial Advisory & Securities said in a report that it is still too early to call it a revival of the investment cycle. "However, the capex cycle has clearly bottomed out and the CMIE data suggest that the turnaround in the capex cycle will likely be driven by infrastructure (power and transport services) sectors, while manufacturing may lag," it said.
"The power and transport infrastructure services sectors contributed to nearly 70% of the rise in new investment in Q3. According to CMIE, 74 new projects were announced in the power sector and 36 projects in transport services, particularly in the shipping and road sectors. In contrast, investment in the manufacturing sector remained muted," Nomura report added.
Siddhartha Sanyal, chief economist with Barclays Capital, said, "There is an uptick in the growth momentum. There is a normalisation in the investment policy initiatives. There is a revival in the sentiment which is expected to translate into better growth."
The outlook for domestic demand is improving, the policy environment is stable and the government is focused on resolving policy bottlenecks. In this backdrop, we expect a gradual pick-up in investment - a key determinant of potential growth - over the course of 2015-16.
Bank of America Merril said in a report that it also expects the investment cycle to improve on some government measures that include faster clearance and reduction in red-tape.
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