India’s private sector investment announcements soared 66% between July and September to nearly ₹5.7 lakh crore, compared to the first quarter of 2022-23, even as there was a worrying dip in the execution rate for outstanding projects already committed to.
ADVERTISEMENT
Though the first quarter (Q1) of the year had reported a 20.5% sequential dip in new investments, the second quarter (Q2) was boosted by super mega projects like Vedanta’s ₹1.54 lakh crore plans to manufacture chips in Gujarat, driving a sharp 41% jump in overall investment projects, investment monitoring firm Projects Today said.
The second quarter uptick lifted outlays announced so far this fiscal to almost ₹13.2 lakh crore, 36.6% more than a year ago, with Central government investments rising 33.7%, private capital outlays growing a more modest 24.8% and States’ public spending plans recording a sharp 120% surge from the first half of 2021-22.
ADVERTISEMENT
States’ capex plans are, in fact, higher than the Central government projects announced so far this year, rising from ₹1.07 lakh crore in the first half of last year to ₹2.36 lakh crore. Fresh Central government outlays stand at ₹1.7 lakh crore, from ₹1.27 lakh crore in the same period of 2021-22.
Projects Today’s latest Projex survey also shows a sharp 87% spike, quarter-on-quarter, in manufacturing sector investments at ₹4.34 lakh crore which accounted for over 56% of all new investment outlays in Q2. However, Electricity, Mining and Irrigation projects dropped sequentially by 59.7%, 33.8%, and 2.1%, respectively.
Though the value of investments is up, the number of new investment projects dropped by about 4.9% from 5,251 projects between April and September 2021 to 4,996 in the same period this year. The surge in mega investment projects of over ₹1,000 crore and super mega projects worth over ₹25,000 crore this year was a key factor for this.
ADVERTISEMENT
“As against 130 mega projects aggregating ₹6.19 lakh crore announced in the first half of last fiscal, this year has seen 162 mega projects worth over ₹9.2 lakh crore, including super mega projects of business houses like Vedanta, ACME, and Adani,” the firm noted.
However, the firm flagged a sharp ‘alarming’ decline in the country’s project execution ratio over the past year, which tracks number of investment plans announced that are under actual implementation, from 38.06% in September 2021 to 35.05% in September 2022. “India will reap the fruits of increased investment proposals only when the announced projects are grounded and completed in time,” the report emphasised.
The slower conversion trend of projects from announcement to execution stage, must be reversed quickly with the government chipping in to help ground at least the critical and large projects early, it said.
ADVERTISEMENT
Projects Today director and CEO Shashikant Hegde attributed a part of this decline to the preponderance for larger investment projects in recent quarters as such plans take more time to implement. “To migrate from the planning stage to ‘under execution stage’ for such investment plans, investors need to secure larger land parcels, environmental and other clearances,” he told The Hindu.
“Moreover, projects other than those in the pharma and healthcare sectors, announced during the COVID-19 period could not make much progress because of full/partial lockdowns. Further, the State governments were short of funds for capex activities during this period,” he pointed out. The creation of an investor-friendly atmosphere by the Centre will help such projects move from the planning to execution stage faster, Mr. Hegde said.
Spliced sectorally, investment plans in the first half saw the sharpest increase in Services and Utilities, which grew almost 47% to a little under ₹5 lakh crore, while manufacturing investments grew 36.2% to ₹6.66 lakh crore.
Electricity and Mining investments dropped 9% and 19.6%, respectively, to collectively hit ₹1.15 lakh crore from ₹ 1.31 lakh crore in the same period a year ago. Also, 141 Irrigation projects worth ₹38,190.7 crore were announced between April and September, up 617.1% in value terms from 76 projects worth ₹5,325.8 crore in the same period of 2021-22.
Despite the overall surge in States’ investments in 2022-23, they dropped 10.7% sequentially in Q2, while Central government projects grew 15.5% in value terms from Q1.