EconSurvey: Investment demand seen strong in short to medium term

[K.Karthik Raja]

EconSurvey: Investment demand seen strong in short to medium term
Thursday, Feb 28

MUMBAI - Investment demand is expected to remain strong in the
short to medium term as Indian economy enters a higher growth
trajectory, the Economic Survey 2007-08 (Apr-Mar) said today.
Banking sector is equipped to meet demand for resources but may
need to review their spreads to drive credit growth.
Investments in equity market, including inflows from abroad, are
seen sustaining on strong projected economic growth and supportive
policies, the survey said.
Finance Minister P. Chidambaram today tabled the Economic Survey
2007-08 (Apr-Mar) in Parliament.
.
BANK CREDIT
While banking sector is equipped to meet the growing demand for
resources, credit growth must be non-inflationary, the survey said.
Productive sectors must receive credit at a reasonable cost.
This may prompt the banking sector to review spreads and this, in
turn, will drive credit growth.
.
CAPITAL MARKET
Indian companies are seen stepping up their access to the primary
market to raise funds via equity and debt issues.
Companies are also likely to raise funds via overseas issues such
as
American depositary receipts and global depositary receipts.
Government efforts to streamline regulation may help enhance
activity in primary capital market, the survey said.
However, performance of Indian shares is dependent on strong world
output growth, expectation of higher returns, favourable risk
perception of investors, and improved global liquidity.
India is seen attracting overseas investment in the share market,
as the country's growth is relatively better compared with other
emerging economies, the survey said.
Also, domestic corporate earnings are expected to remain
"encouraging".
Strong economic growth and supportive policies are likely to
improve
investor preference to invest in equity and debt papers.
"The recent efforts of insurance companies to broaden the
geographical outreach and increase in innovative products would
strengthen their resource base and may stimulate their participation
in equity and debt markets," the survey said.
Policy reforms in the area of insurance and pension funds are seen
auguring well for capital markets.
However, it is important to ensure "healthy and orderly"
conditions in
the market.
The survey also urged regulators and market participants to ensure
stable conditions in the market.
Regulators need to remain proactive and vigilant to avoid
irregularities, it said.
Investors were also urged to resist from panic buying and
selling.

K.Karthik Raja
www.kences1.blogspot.com