Rising domestic demand and capacity utilisation, improved profitability of corporates, sustained credit demand, business optimism and government’s thrust on infrastructure development, is likely to increase the pipeline for project finance. An article in the Reserve Bank of India’s (RBI) monthly bulletin estimates that envisaged capex will increase significantly to Rs 2.45 lakh crore in 2024-25 from Rs 1.59 lakh crore in 2023-24.
“The significant rise in envisaged capital investment of private corporates, based on the projects sanctioned by banks and financial institutions (FIs) during 2023-24, points to upbeat investment cycle. The total cost of projects sanctioned by banks/FIs increased to a record high of Rs3.90 lakh crore. Infrastructure sector continued to attract the major share of envisaged capital investment, led by ‘roads & bridges’ and ‘power’ sectors, reflecting the government push towards infrastructure development,” said an article from officials of RBI’s Department of Statistics and Information Management.
The article said that healthy corporate and bank balance sheets, improved corporate profitability, sustained credit demand, rising capacity utilisation, and optimism in business provide conducive environment for private corporates to undertake investments going forward.
“On the downside, global financial market volatility, protracted geopolitical tensions and geo economic fragmentation could dampen the investment plans. Overall, the investment cycle is expected to remain upbeat and its sustainability needs to be watched closely,” the article said.
Overall, based on the various funding channels, total capital investment of Rs 4.03 lakh crore was intended to be made by the private corporate sector in 2023-24, 56.6% higher than the planned capex during the previous year, led by the rise in total funds for projects sanctioned by banks/FIs and funds raised through the external commercial borrowing route.
