Investment Season
Posted : August 29, 2004 at 6:17 am [IST]
Things in economy seem to be a little disturbing. Forex reserve has stooped growing rather has stuck at $119 billion. Inflation is going upwards. More troublesome are the frequent strikes supported by a strong ally of the present government. Less we talk of political scenario, better it is for the Indian people. But certainly we never had so poor a relation between the ruling party and the opposition. And our performance at Athens Olympics are heart breaking, more so when we compare ours with the Chinese which has become the fashion in our society. However, there is some thing to cheer about. Industry is moving ahead without much serious problem. I wish it gets isolated from the political effect. While going through the pink newspapers and TV news channels, one gets a feeling that it is an investment season now for India after a long many years. all the major sectors are planning to invest for expansion.
“Leading private aircraft maker Maverick Jet is exploring investment opportunities in India. The company wants to set up an aircraft manufacturing facility with an investment of over $1 billion in three years. The US-based Maverick Jet makes small private jets, with low seating capacity. The company, now, has its manufacturing facility in the US The cheap labour in India is one of the major factors for the company’s interest in India As per the plans, the company’s manufacturing facility will start on a pilot basis, which will be ramped up over a period of three years. In the initial phase, Maverick will manufacture about 24 jets on a pilot basis, which will go to 600 jets in three years.”
“Four companies- Maharashtra Seamless of Raigarh, Kolkata-based SPS Sponge Iron and Orissa Sponge Iron and Sunflag Special Steels Ltd of Nagpur on August 27 signed memorandum of understanding with the Orissa government for setting up sponge iron and mild steel plants in the state. The combined capacity of the projects is about 2.8 million tonnes of steel per annum with a projected investment of Rs 2,800 crore.”
“German automotive firm Robert Bosch on August 23 announced an investment of Rs 1,000 crore (Rs 10 billion) in the next four years in India and said it would develop common rail direct injection (CRDi) system in the country by 2006. The CRDi system will be developed by 2006 at MICO’s Bangalore and Nashik plant.”
“Tata Motors is planning to expand capacity at Pune from 1.5 lakh cars to 2.5 lakh cars by December 2004. This is perhaps the first major investment in new capacity since 1999, when the company invested Rs 1,800 crore to manufacture the Indica. Tata Motors will be investing over Rs 6,000 crore over the next five years to expand capacity in both passenger cars and commercial vehicles, to upgrade our R&D and introduce new models, (Incidentally, this figure does not take into account the costs that will be involved in developing and making Ratan Tata’s dream of a people’s car costing less than a lakh of rupees.)”.
“Arvind Mills is setting up a new factory in Bangalore to make shirts. Raymond is increasing denim capacity at its plant in Yavatmal, from 20 million metres to 30 million metres. And synthetic fibres major Indo Rama is doubling its polyester fibre capacity. Welspun India is in the process of setting up a new project at Anjar, in the Kutch district of Gujarat to increase its towel capacity from the existing 10,500 MTPA to 23,000MTPA and also putting up a new sheeting capacity of 35,000 MTPA. On completion, the company will have the second largest capacity across the globe.”
“Steel Authority of India will increase production from 13 million tonnes to 20 million tonnes and will invest over Rs 25,000 crore by 2012. Tata Steel wants to take up its production from 4 million tonnes to 7.4 million tones at an envisaged investment of Rs. 7,800 crore. And the buzz is that South Korean major Posco Steel is on the verge of announcing a large greenfield investment in the country.”
“LG is investing Rs 300 crore for a new plant near Pune. The Noida plant is already running at full capacity. The Pune plant is being developed as an export hub for global market.”
The biggest surge is seen in the power sector. The value of fresh investment proposals in power sector has nearly doubled - from Rs 27,775 crore to Rs 55,513 crore. NHPC is setting up eight projects of 4,322 MW. The same trend would be seen in mining - up from Rs 3,802 crore to Rs 7,671 crore.
However, most of the major investments announced in recent months involve capacity expansions at existing manufacturing plants. There are very few greenfield projects announced at this juncture.
New investment proposals in the services sector are down from Rs 98,422 crore to Rs 68,121 crore. In contrast, manufacturing has seen a modest 12 per cent increase - from Rs 39,159 crore to Rs 43,997 crore. This is a change that was happening in recent years, when money was poured into the booming services sector and kept out of the recession-stricken manufacturing sector. Is this a turning point? Is this the first stage of a major shift back into manufacturing?
According to the Centre for Monitoring Indian Economy (CMIE), outstanding investments in manufacturing in April 2004 were 18 per cent higher than the April 2003 figure. This is the first time since 1997 that there has been an increase in outstanding investment over the year. The upward curve in investment now being observed is likely to sustain in the near future. The rise in new investments in the manufacturing sector and the greater role being played by the private sector here suggest that the corporate investment revival is picking up. Companies seem to have realised that just making their existing assets work harder will no longer do the trick; new assets are needed.
Companies made huge investments in the mid-1990s despite high interest rates. They stayed away from capital expenditure between 1998 and 2002 despite lowest-ever rates. Surprisingly, many companies are using internal cash, rather than borrowing that may also help insulate corporate investments from mild interest rate shocks.
Are these news items on investment not giving some “feel good” pleasure? I wish all these invest proposals do get materialized and the government creates an atmosphere where the investment multiples many times more in near future. A lot of Greenfield projects must come up to help increase in employment opportunities for millions of country men waiting for the day.
- Indra
Category: Manufacturing |
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