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Investment Revival

Mehul Dani: How has 2013-14 been for overall investment? What are the growth indicators for the banking sector in 2013-14?

Rupa Rege Nitsure: The year 2013 – 14 witnessed the poorest investment performance in over a decade. In terms of both new investment projects announced as well as investment projects completed, there was a sharp deterioration from the previous year’s level, which itself was quite low. Except for a few export-oriented industries like textiles that benefited to a certain extent from the rupee correction during FY14 and partial strengthening of global demand, most of the manufacturing sector stayed in a negative growth zone throughout the year. Non-food credit offtake from scheduled commercial banks remained subdued at 13.8% YoY – a tad lower than its growth in the previous financial year. Moreover, most of the demand for credit was in the form of working capital loans rather than project finance reflecting slower pace of fresh capacity creation. Banks extended credit primarily to agriculture sector (supported by better agricultural growth), retail sector, primarily housing and 2-wheeler loans and SME sector, which mainly demanded working capital related loans to protect their ongoing activities. The demand for credit from large corporate as well as infrastructure sectors was subdued in line with the past year.

Sitaram Pothukuchi: Industries across sectors witnessed muted demand, prolonged working capital cycles and constraints on pricing. There was significant increase in input costs for many sectors. However, select sectors and select industrial units within sectors, having unique strengths or foc us maintained or improved their performance which is a pointer to imminent reversal of trend and sentiment. Overall investment remained subdued, with larger share of fresh investment going for de-bottlenecking and brown-field expansion.

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