Govt’s investment proposals fall to 16-year low in second quarter; manufacturing attracts most funds

Govt’s investment proposals fall to 16-year low in second quarter; manufacturing attracts most funds

investment proposals, capital expenditure, manufacturing, Q1, Q2, government spendingNearly 55 per cent of the new investments in the September 2020 quarter is from the manufacturing sector, out of which the chemicals industry attracted most investments.

Proposals for new investment in the second quarter of the current fiscal continued to remain as depressing as at the beginning of lockdown in March 2020. Investment proposals worth Rs 58,700 crore were made for the creation of new capacities during Q2 FY21, compared to around Rs 69,000 crore in the first quarter, and Rs 3.94 lakh crore in the quarter before that, according to CMIE. The nationwide lockdown led the new investments to severely fall as no entrepreneur would consider making an investment proposal during such a period. Also, it could take a long time before new investment proposals climb up, CMIE said.

Nearly 55 per cent of the new investments in the September 2020 quarter is from the manufacturing sector, out of which the chemicals industry attracted most investments. Besides, five projects collectively accounted for half the new investment projects proposed in the quarter. These are a multi-location Rs 7,000 crore solar power project in Rajasthan, a Rs 5,400 crore solar cells manufacturing project in Chennai, a Rs 5,000 crore biotech and life sciences park in Bangalore, a Rs 3,250 crore solar power project in Telangana, and a multi-location Rs 5,200 crore electric vehicle manufacturing plant in Uttar Pradesh. 

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As far as the ownership of the projects is concerned, the structure of new investment proposals is the same as it was in the previous quarter. 44 per cent of the new investments are by government agencies and the rest are by the private sector. However, the Rs 25,800 crore investment proposals made by the Centre and state governments are the lowest in any quarter in the past 16 years, since June 2004. The private sector investments of Rs 32,800 crore is also the lowest by them since June 2004.

Meanwhile, even as new investment proposals never fell below Rs 5 lakh crore since 2004-05,  CMIE added that it does not expect new investment proposals to cross Rs 5 lakh crore in this year. However, this can change if the central government decides to make large investments into infrastructure. Nevertheless, the government has not shown any inclinations to make large capacity-building investments this year

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