Thursday, April 16, 2009

Crisis and Investment

According to a report by Barclays the pace of global output shedding has exceeded the drop in demand by a large margin, to the point where output is now well below demand, a situation that tends to bring its own reversal relatively quickly and hence augurs well for global economic recovery.
The World Bank has warned that the recession may trigger curtailment in spending, but increasing investment in public infrastructure during a crisis is the key to growth for emerging economies like India, since, infrastructure projects often take years to prepare, but postponing them has a drastic knock-on effect for medium term growth. As for project investments in India, according to the survey by Projects Today, as of March 31, 2009, there were 29,628 projects worth Rs 42,35,484 crore, a rise of 37.4 per cent in terms of investment and 29 per cent increase in terms of number of projects over the year-ago period. Going forward Projects Today expects the public sector to continue its project investment activities during 2009-10 in the critical infrastructure sectors like roadways, water supply, electricity, irrigation and community services, the same cannot be vouched for the private sector, which appears to be waiting for some more concrete signs of revival. Given this situation, the pace of project investment is thus expected to remain moderate at least in the first half of 2009-10. The industry on the other hand is concerned over prime lending rates ruling well above 10 per cent even when inflation has reached near- zero level and a debate has been raging about the need to abolish sub-prime lending to bring down the PLRs.
Meanwhile, China has unveiled a $10 billion fund and liberal credit lines to help promote a range of infrastructure projects in Southeast Asian nations reeling from the global economic crisis. China has planned to establish a China-ASEAN investment cooperation fund totaling $10 billion, designed for cooperation on infrastructure construction, energy and resources, information and communications in member states like Thailand, Malaysia, the Philippines, Singapore, Laos, Myanmar, Cambodia, Brunei, Vietnam and Indonesia.


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