NEW DELHI: The Reserve Bank of India (RBI), in its February bulletin, on Tuesday said the fresh round of capex by corporate sector would likely fuel the next leg of economic growth. Balance sheets are healthy on the back of high profits, with leverage remaining constant or improving and the return ratio at a multi-year high, the apex bank said.
As per the apex bank, notable fixed asset growth is seen in oil, gas, and chemicals, while sectors like steel and automobiles lag in fixed asset additions despite strong stock performance. The power sector’s capex plans are ambitious, especially in green energy, where India has made significant progress, with renewables accounting for 43% of total installed capacity.
“…Overall, the corporate sector must get its act together ready to relieve the government of capex heavy lifting and take advantage of the space ceded in financial markets by a lower budgeted borrowing programme and the easing of borrowing costs that has already begun in response to the Interim Budget for 2024-25, driven as it is by capex and consolidation,” it stated in its bulletin.
As per the report, overall inflation developments are also turning favourable, providing a stable environment for corporates to plan expansion strategies in anticipation of a pick-up in demand. “With consumer price inflation coming off its November-December spikes in its January 2024 reading, inflation expectations may stabilise and edge down, although renewed pressures from cereals and proteins can’t be ruled out,” it said.
“Core inflation is at its lowest since October 2019 and nonfood wholesale price inflation remains in deflation. This should augur well for the input cost outlook and selling prices of manufacturing firms,” it added. On the external front, India’s current account deficit fell to 1% of GDP in Q2FY24, a significant drop from the previous year. With India’s strong presence in software services and as a top recipient of remittances globally, the RBI foresees the current account deficit as manageable in FY24 and FY25.
Indian economy looks promising: FinMin
NEW DELHI: The Indian economy shows a promising outlook despite concerns over export prospects due to the Red Sea crisis and higher inflation in developed nations, as per a recent monthly economic review by the Finance Ministry. The RBI predicts a 7% growth estimate for FY25. The International Monetary Fund (IMF), in its January 2024 World Economic Outlook (WEO), revised India’s growth projections to 6.7% from 6.3% in its October 2023 WEO.