Indian Firms' Investments Rise 39% to Rs 32 Lakh Crore in April-December 2024: SBI Report

Investments Events

Posted by NewAdmin on 2025-01-29 09:58:08 |

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Indian companies have significantly increased their investment activities, with a 39% rise in investments to over Rs 32 lakh crore during the first nine months (April-December) of the current financial year, according to a report from the State Bank of India (SBI). This marks a substantial jump from Rs 23 lakh crore during the same period in the previous year. This surge in investments is a positive sign for the Indian economy, indicating growing business confidence and a strong momentum for growth in the coming years. Furthermore, the report highlights that there is a pipeline of Rs 13.63 lakh crore in work-in-progress capital as of March 2024, which is expected to fuel continued investment growth in the near future.

The report also underscores a significant shift in the composition of investments in India. Government investments, as a percentage of GDP, reached 4.1% in FY23, the highest level since FY12. Similarly, private sector investment reached 11.9% of GDP, marking the highest proportion since FY16. This trend reflects an increasingly significant role played by the private sector in driving India’s economic growth. Preliminary data for FY24, expected to be available by the end of February, suggests that private investment may further increase, possibly approaching 12.5% of GDP. This trend highlights the growing confidence of private players in the Indian market and their contribution to the country’s economic development.

In terms of funding sources, external commercial borrowings (ECBs) continue to be an important channel for Indian companies. As of September 2024, the outstanding ECBs stood at $190.4 billion, showing a modest increase from previous quarters. The report notes that non-rupee and non-FDI components of these borrowings, totaling $155 billion, are less volatile and offer greater stability due to the hedging mechanisms in place. These borrowings have become a more stable source of funding for Indian companies, especially with the growing trend of hedging.

Private companies have been particularly active in utilizing ECBs, holding 63% ($97.58 billion) of the total borrowings. Notably, these companies have demonstrated stronger hedging practices, covering approximately 74% of their exposure. This hedging ratio has contributed to a reduction in the risks associated with foreign currency fluctuations. In contrast, public sector companies hold 37% ($55.5 billion) of the total ECBs and are less aggressive in their hedging strategies.

Over the past two years, the overall hedging ratio for non-rupee, non-FDI ECBs has increased from 55% to 68%, indicating greater sophistication in managing foreign exchange risk. The report further highlights that some of the unhedged ECBs are backed by government guarantees, while others benefit from natural hedges. For instance, companies earning revenues in foreign currencies are naturally hedged against currency risks, which accounts for about 1.5% of the unhedged portion of ECBs as of September 2024.

This combination of increased investments by Indian companies, strong private sector participation, and strategic foreign borrowings demonstrates the country’s growing economic resilience. The rise in government and private sector investments, along with the adoption of sophisticated funding and risk management strategies, paints an optimistic picture for India’s future economic growth. However, it will be crucial to monitor the overall economic environment, including the impact of global trends, as Indian companies continue to expand their investments both domestically and internationally.

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