Private sector drives investment on Apr-Dec 2021

Fresh investments announced in the country grew 88% year-on-year to ₹12.76 lakh crore between April and December 2021, with the private sector accounting for about two-thirds of these commitments, according to a new report.

About 7,764 new projects were announced in the first three quarters of the current fiscal. This accounted for growth of almost 47% compared with the same period in 2019-20 (pre-COVID year) indicating recovery in capital expenditure.

In April-December 2021, the private sector announced 3,357 new projects worth ₹8.70 lakh crore accounting for 174% growth from a year earlier and almost double the investment of ₹4.28 lakh crore announced in April-December 2019-20, according to a survey by Projects Today.

On the other hand, the public sector investments grew 12.3% from a year earlier to ₹4.06 lakh crore across 4,407 new projects. Compared with the pre-COVID period of FY20, the figure is lower by 7.8%.

“At present, the private sector is pedalling forward the capex cycle. To sustain this and to pep up private investment further, the government has to step up its investment in infrastructure, both transport and social, on a large scale,” Shashikant Hegde, CEO at Projects Today said.

He added that while most of the key sectors had shown net gains over the pre-pandemic levels, the worrying factor was the noticeable contraction in fresh investment plans by the public sector units during the first nine months of the current fiscal. “Most of the critical infrastructure sectors, other than roadways, saw lesser fresh investment proposals vis-à-vis pre-pandemic levels,” he said.

The survey showed that private investment in real estate increased 43.9%, and anticipating increased demand for their produce from the roadways and real estate sectors, cement and steel companies too announced large-scale capacity building plans. In addition, increased capex plans were also seen in the petrochemical, plastic products, electronics and automobile sectors.

It further highlighted that the 7.8% decline in public sector investment was mainly because of the deep cut in fresh investment by State government agencies. New investment proposals announced by these agencies in the first three quarters of the current fiscal indicated a fall of 32.7% compared with a year earlier.

The pandemic clearly impacted revenues and spurred expenditures on the healthcare and social fronts. As a result, most of the State governments were left with fewer resources for capital expenditure. Irrigation and water supply projects were the most hit because of curtailment in capex plans, Mr. Hedge added.

“Though fresh investment by central government agencies registered a healthy growth of 37.8%, bulk of the growth was because of the rise of investment in roadways projects. Barring this sector, all other major sectors in the infrastructure landscape registered a decline in fresh investments,” the survey showed. A little more than two-fifth of the fresh investment proposed by the government entities was in roadways projects.

As per the survey, Gujarat topped the State ranking table with 943 new projects worth over ₹2.31 lakh crore, cornering around 18% of the total fresh investment. Gujarat was followed by Maharashtra with the highest number of 1,129 new projects entailing fresh investment of ₹1.51 lakh crore, Tamil Nadu (304 projects worth ₹1.43 lakh crore), Karnataka (611 projects worth ₹91,015.98 crore), and Uttar Pradesh (444 projects worth ₹86,151.44 crore).

However, when ranked based on the net increase in investments compared with April-December 2019 (pre-COVID) period, Tamil Nadu emerged as the highest net gainer. “As a result of the concerted efforts of the State government, the State managed to attract additional fresh investments of ₹1,07,610 crore. This included 20 mega projects. During Q1-Q3/FY20 period, the State had managed to attract ₹36,292 crore of fresh investment,” Mr Hedge said.

Tamil Nadu was followed by Gujarat with a net gain of Rs 77,892 crore, Telangana (net gains of Rs 65,288 crore), Uttar Pradesh (net gains of Rs 56,053 crore) and Karnataka (net gain of Rs 37,027 crore).

“The list of states who are yet to reach the pre-COVID levels was headed by Andhra Pradesh. The southern state registered a net loss of Rs 39,535 crore. Maharashtra, the second-ranked state in terms of total fresh investment, registered a net loss of Rs 26,940 crore. The other net losers to figure among the top five states were Kerala (Rs 20,683 crore), West Bengal (Rs 15,071 crore) and Rajasthan (Rs 15,062 crore),” the survey said.

Mr. Hedge said the survey was conducted when the number of people affected by the Omicron variant of COVID-19 pandemic was hitting a high across the country. Hence, all predictions made at this point are based on the assumption that the pandemic will be reined in within a month or two.

“With most of the economic indicators showing positive growth in the recent past, Projects Today expects the revival seen in the fresh investment activities to gain pace in FY23. The healthy growth seen in the manufacturing and real estate sectors is expected to continue in FY23. Similarly, we expect increased fresh investment in the roadways sector to continue in FY23 too,” he added.

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