New investments improve in Q3

10 October 2014

According to the Centre for Monitoring the Indian Economy (CMIE), new investment projects announced rose to 7.3 per cent of GDP in Q3 2014 from 3.2 per cent in Q2.

On a 4-quarter rolling sum basis, investment rose to 4.8 per cent of GDP from 4.0 per cent, with the rise driven almost equally by the government and private sectors.

The power and transport infrastructure services sectors contributed to nearly 70 per cent of the rise in new investment in Q3.

According to the 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.

It is still too early to call it a revival of the investment cycle, noes CMIE.

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.

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 pickup in investment - a key determinant of potential growth - over the course of 2015-16."

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