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FI investment in private sector set to surge - Views on News from Equitymaster
 
 
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  • Jan 20, 2000

    FI investment in private sector set to surge

    A Reserve Bank of India (RBI) study has reported that the growth of investments by financial institutions (FIs) in the private sector is likely to be at 9.5% during FY00. This compares well with a negative growth rate of 3.5% in FY99. This has been reported by a leading national daily.

    The RBI study has put the aggregate capital expenditure on projects in FY00 between Rs 775 bn and Rs 785 bn.

    The Indian economy has been gaining momentum since the beginning of this fiscal year. There was however some skepticism regarding the sustainability of the recovery process. The pick up in investment activity, as indicated by the report, is sure to further strengthen the recovery process and quell the fears of a slowdown.

    The study comes in the wake of a rate reduction announced by the government of India. Although only a few institutions have responded by lowering their lending rates, it will, due to competitive pressures, sooner or later lead to a reduction in borrowing costs across the board. This could further step up the demand for funds for investment activity.

    The pick up in investment activity bodes well for the banking and finance sectors, as it will enable them to utilise funds in a more efficient manner. From the macro point of view, the sustainability of the recovery process would also depend on the pick up in investment activity, which so far seems to be right on track.

     

     

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