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FDI is key source of capex funding

The study notes that there is an increasing preference for FDI as an alternative source of capex financing.

, ET Bureau|
Last Updated: Feb 24, 2020, 08.19 AM IST
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FDI
It surged rapidly from 2012-13 to 2016-17.
Even as bank credit growth to fund projects has slowed down, FDI and private placement of debt have emerged as a major source to fund capex. In fact, FDI contribution in funding capex has doubled from Rs 1.47 lakh crore in FY14 to Rs 3 lakh crore in FY19. It continued to grow in first of FY20 as well, RBI study shows.

“In the recent years, debt instruments like bonds and debentures and foreign direct investment (FDI) have assumed prominence as alternative sources of capex financing,” said the study titled “Private Corporate Investment in 2019-20: Some Signs of Improvement.” Though, mobilisation of funds through private placement of debt (bonds and debentures) rose substantially during the period from 2013-14 to 2016-17, it moderated during 2017-18 and 2018-19.
fdi-graph

The study notes that there is an increasing preference for FDI as an alternative source of capex financing. It surged rapidly from 2012-13 to 2016-17. Thereafter, it subsided in 2017-18 but rose again in 2018-19. If we look at the five-year period from FY14 and FY19, FDI funding for capex doubled. The rise in FDI inflows continued in the first half of 2019-20 as compared to the corresponding period of the previous year.

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