Skip to main content

"Worrying" signs: Private sector capex plans decline 11%, corporate profits down 0.05%

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

Dalit rights and political tensions: Why is Mevani at odds with Congress leadership?

While I have known Jignesh Mevani, one of the dozen-odd Congress MLAs from Gujarat, ever since my Gandhinagar days—when he was a young activist aligned with well-known human rights lawyer Mukul Sinha’s organisation, Jan Sangharsh Manch—he became famous following the July 2016 Una Dalit atrocity, in which seven members of a family were brutally assaulted by self-proclaimed cow vigilantes while skinning a dead cow, a traditional occupation among Dalits.  

Global NGO slams India for media clampdown during conflict, downplays Pakistan

A global civil rights group, Civicus has taken strong exception to how critical commentaries during the “recent conflict” with Pakistan were censored in India, with journalists getting “targeted”. I have no quarrel with the Civicus view, as the facts mentioned in it are all true.

Whither SCOPE? Twelve years on, Gujarat’s official English remains frozen in time

While writing my previous blog on how and why Narendra Modi went out of his way to promote English when he was Gujarat chief minister — despite opposition from people in the Sangh Parivar — I came across an interesting write-up by Aakar Patel, a well-known name among journalists and civil society circles.

Remembering Vijay Rupani: A quiet BJP leader who listened beyond party lines

Late evening on June 12, a senior sociologist of Indian origin, who lives in Vienna, asked me a pointed question: Of the 241 persons who died as a result of the devastating plane crash in Ahmedabad the other day, did I know anyone? I had no hesitation in telling her: former Gujarat chief minister Vijay Rupani, whom I described to her as "one of the more sensible persons in the BJP leadership."

Unchecked urbanisation, waste dumping: Study warns of 'invited disaster' as khadi floods threaten half of Surat

An action research report, “Invited Disaster: Khadi Floods in Surat City”, published by two civil rights groups, Paryavaran Suraksha Samiti and the People's Union for Civil Liberties, Surat, states that nearly half of Gujarat's top urban conglomerate—known for its concentration of textile and diamond polishing industries—is affected by the dumping of debris and solid waste, along with the release of treated and untreated sewage into the khadis (rivulets), thereby increasing the risk of flood disaster.

Polymath academy or echo chamber? A personal take on knowledge, control, and WhatsApp moderation

A few months back, I was made a member of a WhatsApp group called Polymath Academy. Frankly, I didn’t know what the word polymath meant until its administrator, veteran Gujarat-based sociologist Vidyut Joshi — with whom I have been interacting since the mid-1990s when he was with the Gandhi Labour Institute — told me it refers to a person with an exceptional academic record.

Two decades on, hunger still haunts Gujarat: Survey exposes stark gap behind poverty claims

A Niti Aayog report , released about two years ago, estimated that in Gujarat — which our powers-that-be have long considered a model state — 11.66% of people are "multidimensionally poor," a term referring to an index that seeks to estimate "multiple and simultaneous deprivations" at the household level across three macro categories: health, education, and living standards.

English proficiency for empowerment: Modi’s SCOPE vision contrasts Amit Shah’s remark

While Union Home Minister Amit Shah may have asserted that soon a time would come when those speaking English in the country would “feel ashamed”, it is ironic that Narendra Modi, when he was Gujarat chief minister, had launched what was called the SCOPE programme, actively involving the University of Cambridge to provide opportunities to the youth of Gujarat to "become not just job seekers but job creators (entrepreneurs)."

Whither whistleblower concerns? Air India crash: Govt of India report suggests human error

Is the Ministry of Civil Aviation, Government of India, seeking to bail out Boeing in its preliminary report released recently despite the top MNC's whistleblower concerns ? It would seem so, if the Ministry's Aircraft Accident Investigation Bureau's (AAIB's) preliminary findings into the catastrophic crash of Air India’s Boeing 787-8 Dreamliner, registration VT-ANB, which went down shortly after takeoff from Ahmedabad on 12 June 2025, killing all 241 on board and 19 on the ground, is any indication.