Following a revival through 2021-22, new investment projects in India declined 20.5% sequentially in the first quarter of 2022-23, as slowing growth and increasing uncertainty caused by global headwinds sapped enthusiasm for fresh investments among private investors, according to a survey.
The manufacturing and infrastructure sectors, that had led the revival in fresh capital investments through last year, both recorded sharp falls in new investments during the April to June quarter,investment monitoring firm Projects Today’s quarterly survey shows.
Private investments fell 31% quarter-on-quarter, with foreign investments seeing a much steeper drop of 59%. Central government and public sector investments recorded a marginal rise of 1.62% over the preceding quarter, but States’ new capex plans fell by almost 7%.
A total investment commitment of ₹4,34,664.86 crore in 2,506 new projects was announced in the first quarter, as against 2,467 projects worth ₹5,46,673.78 crore between January and March 2022.
“Fresh capital spending lost steam in the first quarter of this year, after four quarters of growth, with investment announcements slowing in the private as well as public sectors,” Shashikant Hegde, director and CEO of Projects Today told The Hindu.
Mr. Hegde attributed this to the dip in economic growth to 4.1% in the January to March 2022 quarter, combined with the recent downturn in manufacturing and the elevated commodity and crude oil prices.
“The prevailing uncertainties in the global business and economic environment made fresh investment plans tentative, with many in the private sector opting to wait and watch. However, we believe this will be reversed soon and the growth seen last year will continue in the second half of 2022-23,” he said, pointing to higher credit offtake in corporate India amid a pick-up in demand in sectors like auto, real estate and electronics as a good augury.
Fresh investment in manufacturing dipped 26.4% in Q1, from Q4 of 2021-22, with a noticeable fall in sectors like textiles, basic chemicals, cement, and metals. Investments in electronics and automobiles, however, bucked the downtrend and continued to grow at last year’s pace.
Mining and electricity investments grew at a robust 46.4% and 84%, respectively, but fresh outlays for infrastructure services and utilities fell 32.4%. Investments in transport sectors like roadways, railways, airports, ports and power distribution, that typically account for half of infrastructure investments, saw a sharp fall too.
Road investments dipped 20.7%, led by a drop in the National Highway Authority of India’s outlays: from 38 new highways worth ₹31,584 crore between January and March 2022 to just 27 new projects worth ₹17,111.5 crore over the April-June quarter. Investment plans for airports, ports, and railways dropped steeply by 94.2%, 81.7% and 80.4%, respectively, over the previous quarter.
Investments in irrigation projects more than tripled to almost ₹15,900 crore, driven largely by seven new plans announced by the Narmada Valley Development Authority in Madhya Pradesh worth ₹10,338.5 crore.
Among the States, the highest capital expenditure plans worth over ₹56,300 crore were announced in Telangana, followed by Karnataka (₹54,053 crore) and Gujarat (₹53,947 crore). Together, these three States cornered 38% of the new capex plans in Q1. Investments exceeding ₹1.03 lakh crore were planned across three other States: Maharashtra (₹38,274 crore), Odisha (₹34,122 crore) and Uttar Pradesh (₹30,800 crore).
Tamil Nadu, which was ranked third in terms of new investment projects behind Gujarat and Maharashtra in 2021-22, was ranked tenth in Q1 with investment announcements worth ₹15,327 crore.
West Bengal, Andhra Pradesh and Madhya Pradesh, none of which had figured in the top 10 investment project destinations last fiscal, emerged as the seventh, eighth and ninth biggest investment recipients in Q1.
