More than half the CEOs surveyed say they plan to increase investment by over 25%
Companies in India are planning to accelerate investment in adding capacities in 2022-23 as consumer demand is showing signs of a pickup after two years of slowdown due to the pandemic and lockdowns, a dipstick survey of chief executive officers (CEOs) this month shows.
More than half the 19 CEOs this newspaper surveyed said they planned to increase investment by over 25 per cent this financial year over FY22 while 10.5 per cent said they would invest less than they did in the previous financial year.
Early this month, the Reserve Bank of India (RBI) had forecast investment was likely to gain traction with improving business confidence among investors, a pickup in bank credit, and continuing support from the government’s capital expenditure on roads and highways.
Capacity utilisation in manufacturing recovered further to 72.4 per cent in the December quarter of FY22 from 68.3 per cent in the previous one, surpassing the pre-pandemic level of 69.9 per cent in the March quarter of FY20.
Corporate India usually starts planning projects when capacity utilisation crosses 75 per cent of the installed capacity. Reliance Industries, Tata Group, JSW, and Adani Group are among the top companies that have announced plans to invest in renewable energy, steel plants, and semiconductor businesses.
Production-linked incentive schemes have encouraged companies to invest.
“Demand has gone up and that brings with it supply-side constraints as a lot of small and medium enterprises have shut shop and the large ones are finding it difficult to meet manpower constraints,” said the CEO of a manufacturing company.
T V Narendran, Tata Steel CEO and managing director, and president of the Confederation of Indian Industry (CII), on Monday said around 70 per cent of the CII’s members planned to spend more on capex this year and also would hire more than they did in the past.
“There is turbulence, but nothing will derail the growth trajectory significantly,” he said.
The rising cost of raw materials due to a global spike in commodity prices was the main worry of the CEOs. Of them, 36.8 per cent said there would not be any impact on their earnings while 26.3 per cent were of the view that the effect on their costs would be 1-2.5 per cent.
CEOs said inflation was a big worry and there were other factors chipping away at business sentiment.
“Other than a severe pandemic wave, the biggest threat facing Indian businesses is unstable global macro-economic factors like inflation, interest rates, logistics/supply chain, and oil price and the ongoing geo-political tension,” said the CEO of a hotel company.
When asked about the rising interest rates, both in India and overseas, 36.8 per cent said they were not greatly worried about it while a similar number said they were.
The rest were apprehensive about the matter but not very much anxious.
Corporate India is veering around to the idea that employees will have to return to office in due course. Around 47.4 per cent of the CEOs said their colleagues were in office and 63.2 said in another six months, it will be only work in office. Only 15.8 per cent of the CEOs said they would allow work from home both now and in the future.
When asked about the war in Ukraine, 47.4 per cent said it had no impact while a similar number said it had moderately affected their businesses.
(Dev Chatterjee with Shally Mohile, Shivani Shinde, Ishita Ayan Dutt, Vinay Umarji, and Shine Jacob)