Projects sanctioned by banks and financial institutions in 2008-09 stood at Rs 3,33,039 crore (projects of Rs 10 crore and above) and was up from projects worth Rs 2,44,296 crore sanctioned by them in 2007-08. It rose further to Rs 4,55,968 crore in 2009-10.

However, domestic policy issues, government’s flip flop on certain regulations and issues linked to corruption over the last 2-3 years have severely dented India Inc’s confidence to go ahead for capital expenditure on new projects and the general corporate activity.

Experts say, the real activity is still some time away and 2013 may just prove to be a year of preparation for that transformation by corporates.

The number of projects sanctioned by banks in 2010-11 came down to 710 from 754 in 2009-10 and the project cost sanctioned by banks and financial institutions which stood at Rs 3,92,600 crore in 2010-11 witnessed a decline of 14 per cent over the previous year.

The decline was far sharper in 2011-12 as the number of such projects came further down to 668 with a sanctioned assistance by banks falling down to Rs 2,12,00 crore in the year, a downfall of 46 per cent over 2010-11.

Market experts suggest that the trend continues to be the same in 2012-13 and with almost half of the financial year already gone by, India Inc does not seem to be very excited about making investments right now.

“There has been a decline in corporate activity because of the economic slowdown and with growth coming down from 8.5 per cent to 5.5 per cent, automatically the industry slows down and has taken a step back,” said Shanti Ekambaram, president, corporate and investment banking at Kotak Mahindra Bank.

There has been a clear decline in the activity in the infrastructure and the metal segment. While the sanctioned projects by banks and FI’s in the infrastructure space stood at Rs 2,15,200 crore in 2010-11, it halved to Rs 1,02,900 crore in 2011-12. In the metal space it has come down from Rs 80,000 crore to Rs 31,500 crore in the same period.

“Infrastructure is the space to start with. Investment in capital goods and rise in order books of heavy industries will have a ripple effect on overall growth,” said Sanjeev Krishnan, leader, private equity, PWC.

Experts are of the view that while the government has started taking some steps in the right direction, the overall environment and confidence building will have to be there.

“I think the government has been making some positive statements but we have to see some walk. What is worrying and why I don’t see signs of change in that is that the investment cycle still has not changed. The consumption cycle is still holding up but are companies rushing to start investing? No,” said Ekambaram.

The slowdown has, however, not been limited from the banking side but even the merger and acquisitions and fund raising activity including IPO’s have been very weak over the last few years.

“The overall confidence of corporates to take out money and put them in projects has been very weak over the last 18 months, “ said Krishnan. “There are going to be regional and local issues but when the issues become more generic then there is a problem which has been there in the past.”

Some believe that before the fresh investment plans start to come in, there backlogs from previous years to be cleared which the government has to start clearing to infuse some confidence.

“In the area of power, coal and mining the backlog of projects are there and the policy level issues still has no be cleared, so why will someone go ahead and put a Rs 10,000 crore project,” added Ekambaram. Even private equity players are saying that the fund raising from foreign investors has been tough over the last 18 months.

Archana Hingorani, CEO of IL&FS Private Equity said that she is raising funds for the growth fund but it has been challenging.

“Unless and until, international investors have confidence in Indian policy more than the Indian economy, we are going to see this. You already have the cycle bringing it down, economic factors sliding and on top of that you are adding delays due to policy inaction, adding new rules which change the premise on which you came in the first place. For the medium term your signalling is so poor, there are so many questions on tax related issues and all that is holding them back,” said Hingorani.

But is that all going to change in 2013 and will we see corporates going ahead with their investment plans, it seems unlikely.

“It will take a lot more time,” said Krishnan. “The way draconian moves were taken, it has impacted global investors and that takes away the sting from the investment climate.”