Skip to main content

"Worrying" signs: Private sector capex plans decline 11%, corporate profits down 0.05%: Reliance think-tank expert

By Our Representative
Painting a gloomy picture of the Indian economy, a Reliance Industries think-tank analysis has said that, despite the Make in India campaign of Prime Minister Narendra Modi, statistics about domestic investment and capital formation are “not encouraging” and show a “decline in the second quarter of 2015”, with “India's saving rate down from a peak rate of 38 percent to 31 percent.”
The analysis, released by the Observer Research Foundation (ORF), titled “Urgent need for investment”, by ORF senior fellow Jayshree Sengupta, says, “Everyone watching the economy is worried about the slow rate of investment which is not forthcoming from the Indian corporate sector.”
Sengupta says, “Net profits in the second quarter of 2015-16 have remained flat at 0.05 per cent for the corporate sector. Except for pharmaceuticals, fast-moving consumer goods and automobiles, companies are struggling to pay off debts.”
Quoting international rating agency Standard & Poor (S&P), the analysis says, “100 corporates had a debt of $300 billion in 2014. High interest payments towards paying back of corporate debt are cutting into their profits.”
Citing Indian rating agency Crisil, she says, an analysis of the 192 listed public and private sector companies suggest that “key sectors such as infrastructure, energy, metals, cement, automobiles, pharmaceuticals, and textiles, showed 4 per cent decline in capital expenditure for 2015-16.”
Pointing out that “for private sector companies the capex plans declined even more by 11 per cent”, Sengupta says, “Corporate sector depends a lot on rural demand and there has been bad news on the agricultural front.”
“Agricultural stress is still present and agricultural growth slid to 1.5 per cent in April-June quarter. Rural demand is also dented because of falling wage growth due to three consecutive monsoon shocks. Slack demand is also due to low earnings from agricultural exports because of low commodity prices”, the analyst says.
Stating that “global commodity prices have fallen by nearly 17 per cent compared to last year”, she says, “Sales of the corporate sector have declined by 4 per cent. Due to low rural demand, there is piling up of inventories in factories and thus new investment by the owners is being stalled.”
The analyst adds, “According to Reserve Bank of India, factories are running 30 per cent below capacity. In ten out of 12 sectors, capacity utilization is at a five-year low causing new project announcements to dry up.”
Wondering why, when there are 87 billionaires and 2.5 lakh dollar millionaires, investment is still not forthcoming in India”, Sengupta says, “In Make in India campaign, 25 areas have been listed and Modi wants to make India a new global manufacturing hub."
"But red tape, problems with availability of skilled labour, land acquisition, creaky infrastructure, mandatory clearances of various kinds and lack of clear exit laws, are holding back investors from coming forward”, the analyst adds.
“Manufacturing growth can be fueled by a big rise in export demand. But exports are down for 11 consecutive months and have shrunk by 17.5 per cent”, the analysis predicts, “Exports will remain sluggish for the next one year because of the slowdown in global demand with world output growing only at 3 per cent.”

Comments

TRENDING

Mystery around Gujarat PSU 'transfer' of Rs 250 crore to Canadian firm Karnalyte

By AK Luke, IAS (Retd)*
While returning from a Board meeting of the Oil India Limited (OIL) in Ahmedabad some time in 2012, two officers of the Gujarat State Fertilizers and Chemicals Ltd (GSFC), Nanavaty and Patel,  saw me off at the airport. They said they were proceeding to Canada in connection with a project GSFC had entered into with a company there. As we were running late, I hastily wished them the best.

Savarkar in Ahmedabad 'declared' two-nation theory in 1937, Jinnah followed 3 years later

By Our Representative
One of the top freedom fighters whom BJP and Prime Minister Narendra Modi revere the most, Vinayak Damodar Savarkar, was also a great supporter of the two nation theory for India, one for Hindus another for Muslims, claims a new expose on the man who is also known to be the original proponent of the concept of Hindutva.

Indians have made 119 nations their ‘karma bhumi’: US-based Hindu NGO tells Rupani

Counterview Desk
In a stinging letter to Gujarat chief minister Vijay Rupani, the US-based Hindus for Human Rights (HfHR), referring to the report citing his justification for the Citizenship Amendment Act (CAA) – that “while Muslims can choose any one of the 150 Islamic countries in the world (for residence), India is the only country for Hindus" – has said, he should remember, Hindus have made several countries, including USA, their home.

J&K continues to be haunted, as parts of India 'degenerate' into quasi-Kashmir situation

By Rajendran Narayanan*, Sandeep Pandey**
“Jab har saans mein bandook dikhe toh baccha kaise bekhauf rahe?” (How can a child be fearless when she sees a gun in every breath?) remarked Anwar, a gardener from Srinagar, when asked about the situation in Kashmir. On November 30, 2019, a walk through an iron gate in a quiet neighbourhood of Srinagar took us inside a public school. It was 11 am when typically every school is abuzz with activity. Not here though.

Tata Mundra's possible closure? Power ministry's 'pressure tactic' on consumer states

By Bharat Patel*
Tata power has announced to the Union Ministry of Power that Tata Power may be forced to stop operating  its imported coal-based Mundra Ultra-Mega Power Project (UMPP) after February, 2020. It is not only unfortunate but also criminal that irreversible damage has been caused to the fragile ecosystem of Mundra coast for a project that will have a running life of only seven years.

What about religious persecution of Dalits, Adivasis, asks anti-CAA meet off Ahmedabad

By Rajiv Shah
A well-attended Dalit rights meet under the banner “14 Pe Charcha” (discussion on Article 14 of the Indian Constitution), alluding to Prime Minister Narendra Modi well-known campaign phrase of the 2014 Parliamentary elections, “chai pe charcha” (discussion over cup of tea), organized off Ahmedabad, has resolved on Wednesday to hold a 14 kilometres-long rally on April 14 to oppose the controversial Citizenship Amendment Act (CAA), enacted on December 10-11.

Population control? 10% Indian couples want to delay next pregnancy, but fail

Counterview Desk
Shireen Jejeebhoy, director at Aksha Centre for Equity and Wellbeing, previously senior associate at the Population Council, India, argues that the debate on the country's population was fuelled by Prime Minister Narendra Modi’s Independence Day address to the nation, where he drew attention to “concern” about the challenges posed by this ‘exploding’ population growth, needs to centre around the promotion of rights and education, instead of the language of explosion and the threat of coercion that this term implies.

Upendra Baxi on foolish excellence, Indian judges and Consitutional cockroaches

By Rajiv Shah
In a controversial assertion, top legal expert Upendra Baxi has sought to question India's Constitution makers for neglecting human rights and social justice. Addressing an elite audience in Ahmedabad, Prof Baxi said, the constitutional idea of India enunciated by the Constituent Assembly tried to resolve four key conflicting concepts: governance, development, rights and justice.

Kerala governor turned History Congress into political arena, 'insulted' Prof Irfan Habib

Counterview Desk
In a signed statement, office bearers of the Aligarh Society of History and Archaeology (ASHA), Prof Syed Ali Nadeem Rezavi (president), Prof Jabir Raza (vice-president), Prof Manvendra Kumar Pundhir (secretary) and Prof Farhat Hasan (joint secretary), have said that Kerala governor Arif Mohammad Khan had sought to insult veteran historian Prof Irfan Habib, 88, at the 80th session of the Indian History Congress, even as turning it into his “political arena”.