Bankers see green shoots, enquiries for manufacturing projects

The sluggish growth rate and concerns on the lack of an investment push notwithstanding, lenders are beginning to see some green shoots as far as investment activity is concerned.

Some of the leading state-run banks are beginning to get enquiries for expansions in manufacturing projects and are bullish that with Finance Minister P Chidambaram's latest initiative to de-bottleneck stalled projects, things should begin improving.

Ashwani Kumar, chairman and managing director of the public sector Dena Bank, told Firstpost that major reasons for stalled projects were the lack of adequate fuel linkages, environmental clearances and, in the case of some road projects, the acquisition of land.

Chidambaram on 8 April met a clutch of bankers again and discussed the issue of stalled projects. Reuters[/caption]

"The demand for credit is still not very high, but queries have started coming in," Kumar said. He said in an earlier meeting with the FM these issues had been reviewed and concerns taken on board.

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Chidambaram on 8 April met a clutch of bankers again and discussed the issue of stalled projects and how to get them back on the rails. He has said the government will give a push to ensure stalled projects are started again.

The finance minister has said about Rs 7 lakh crore - by way of about 215 infrastructure projects - have been stuck owing to various reasons, among them regulatory hurdles and the lack of fuel linkages.

"The companies we are speaking to also feel things should improve from here on," Kumar explained. "There is a clear indication even from Budget 2013 that the government means business. There are green shoots being seen. We are getting enquiries."

Banks are also keen to ensure these stalled projects are back on track, since the failure to do that will impact their books in a major way and increase their non-performing assets (NPA).

A report in The Economic Times on 9 April quotes finance ministry estimates saying as much as Rs 54,000 crore worth of bank loans are at stake if these projects aren't commissioned.

India Inc bullish

Despite the bottlenecks, Indian companies appear bullish about the prospects going forward, with a Grant Thornton survey of companies showing that as many as 73 percent of Indian business plan to actually increase hiring in the coming year, unchanged from three months earlier.

This is much higher than the global average of 36 percent. An overwhelming 83 percent of Indian businesses are optimistic about the Indian economy now, up from 78 percent three months earlier, the Grant Thornton International Business Report, a quarterly survey of over 3,000 businesses in 44 countries has thrown up.

However, the survey does say that a key area of concern for Indian business is inflationary pressure, with 76 percent of businesses planning to increase the prices of their products, compared with 69 percent three months ago.

This percentage is the third highest in the world, after Botswana and Argentina, the survey says. However, 88 percent of Indian businesses plan to increase employee wages, up from 83 percent earlier.

Important to note also is the fact that even globally, 27 percent of businesses are optimistic about the prospects now, as opposed to just 4 percent in the previous quarter.