Government infrastructure spending sees steep fall in Q1

Fresh investments dip by 18% overall

July 10, 2021 10:17 pm | Updated July 11, 2021 12:57 pm IST - NEW DELHI

Photo used for illustration purpose only.

Photo used for illustration purpose only.

The second wave of COVID-19 and a steep decline in new investment projects from government agencies dented fresh investment plans in the economy by 18% in the first quarter of 2021-22, compared to the previous quarter.

Despite the government’s stated push for capital spending to revive the economy, public infrastructure investments almost halved compared to the January-March quarter, bringing total outlays on new infrastructure plans down by nearly 39% over April to June this year.


Almost 2,200 new projects entailing fresh investments of ₹3,34,572.5 crore were announced during the quarter, compared to 2,716 new projects worth ₹4,08,237 crore in the previous three-month period that had seen both private and public sector investments rebounding strongly for the first time since the pandemic hit India.

Overall new investments from the Union and State governments fell 41.6% from nearly ₹1.67 lakh crore in Q4 of 2020-21 to ₹97,376 crore, as per Projects Today’s survey on project investments in India during Q1 of 2021-22. New public sector irrigation and manufacturing projects also fell off the cliff by 96% and 77%.

By contrast, private investments sequentially declined by a mere 1.7% in the first quarter of this year, thanks to a significant 45% uptick in manufacturing projects from ₹1.17 lakh crore between January and March 2021 to over ₹1.70 lakh crore in the quarter just concluded.

However, about ₹1.1 lakh crore of these private manufacturing investments are related to just four massive projects, including a ₹60,000 crore green energy complex announced by Reliance Industries, two PVC units in Gujarat from Adani Enterprises worth ₹29,200 crore and a ₹10,000 crore copper smelter by Vedanta.

Foreign investment projects slipped 95.4% from the previous quarter, with just 17 projects worth ₹3,450.5 crore in Q1 of this year, from 34 projects worth over ₹75,000 crore in the preceding quarter.

“While the flaring up of COVID 2.0 affected economic activities as well as fresh project announcements, the severity was not as much as observed in the first quarter of last year immediately after the national lockdown,” said Shashikant Hegde, director and CEO of Projects Today.

“The fall in fresh investments was also because of a sharp fall in announcement of new projects by government agencies — both Central and State. Recognising this, the Finance Ministry has rightly prodded government agencies to front load their capital expenditure plans,” Mr Hegde added, adding that the timely execution of over 8,000 projects worth ₹153.37 lakh crore listed in the National Infrastructure Pipeline must also be pushed.

“That will not only revive the economy but also instil confidence in private companies to expedite their own capex plans,” he pointed out.

Public investments in new hospitals rose by 25% between April and June, but the number of projects declined from 85 to just 38, while investments in other community services, including water and sewage projects fell significantly.

With Reliance Industries’ and Adani group’s mega projects planned in Gujarat, the western State garnered nearly a third of all new investments, over ₹1.08 lakh crore, in the quarter. Maharashtra retained its second position for the second quarter in a row, with ₹43,559 crore of new projects despite being one of the worst-affected States in the second pandemic wave.

The April to June quarter also saw electricity investments falling to nearly a third of the preceding quarter’s levels, while investment plans in transport services dropped 55.1%. The National Highways Authority of India announced only 24 highways worth ₹17,285.74 crore and just eight new railway projects worth ₹55.6 crore were kicked off.

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