Private corporate investment in 2008-09 might slow down:RBI

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Mumbai, Aug 14 (UNI) The Reserve Bank of India today indicated that the private corporate investment in the current fiscal might increase, although it may grow at a slower pace.

In a report on the private corporate investment for 2007-08 and 2008-09 in its latest monthly bulletin, the RBI had said ''though there could be a slight shift from accommodative to neutral financing conditions which may affect the fundamentals that drive business investment, corporates' incentives to invest are likely to remain strong in 2008-09, namely high domestic demand and high capacity utilisation rates amidst improved profitability of last few years'' The RBI said ''notwithstanding recent slowdown in overall business activities, corporate sector managed to maintain quite decent profitability level in 2007-08 and against the backdrop of upbeat performance in recent years, the corporate sector appears to have the capacity to invest''. Though on balance, the risks to the outlook for fixed investment growth has somewhat tilted to the downside, the domestic demand is still resilient and supporting the overall economic growth, driving corporates to continue their expansion plans at the back of rising capacity constraints, the report commented.

Downside risks arise from the likely impact of high and rising international oil prices, increasing cost of external capital, hardening of interest rates abroad and input and wage cost pressures in some industries. With prospects of decelerating pace in growth of domestic and global economy, environment for the fixed investment due to its cyclical nature could become less conducive.

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