Private sector investment may see rise

Value of new project announcements by private sector increases for first time in 2 years: CMIE data

The value of new project announcements by the private sector rose for the first time in two years in the June 2018 quarter, analysis by The Hindu of the latest data by the Centre for Monitoring Indian Economy (CMIE) showed. Within this, the bulk of the announcements were made by foreign companies.

Private sector new project announcements, worth ₹2.02 lakh crore in the June 2018 quarter, grew 43% over what was announced in the same quarter of the previous year, according to the data.

This is the first quarter of growth in this category since June 2016.

In contrast, the government announced new projects worth ₹27,453.4 crore in the June 2018 quarter, a contraction of 77.6% over the June 2017 quarter.

This marks the fifth consecutive quarter of contraction in the value of government new project announcements.

As a result, private sector announcements made up 88% of all new project announcements in the quarter, the highest proportion the sector has achieved since September 2003, the earliest period for which the Centre for Monitoring Indian Economy has data. While new project announcements in themselves do not portray a complete picture of investment activity in the country since many of these projects might not reach completion, analysts do say that such announcements reveal the intent and mood —especially of the private sector — for the immediate future.

Note ban, GST impact

“There were two major issues due to which the private sector got a jolt — demonetisation, to an extent, and also GST,” Abhishek Rastogi, partner, Khaitan & Co told The Hindu .

“Now, I think, the impact of these two massive changes are not there at least on the downside. That’s why the revival of the private sector, and specifically MSMEs, should take place. If you see, a lot of these investments are by medium-sized entrepreneurs. The government has taken a few steps towards the revival of MSMEs.”

Foreign firms to invest

Within private sector new project announcements, the bulk of the growth was due to the announcements made by foreign companies, the data showed.

New project announcements by the Indian private sector accounted for 30.4% of all announcements made by the private sector in the June 2018 quarter.

The foreign private sector, in comparison, accounted for an overwhelming 69.6% of such announcements.