- Recent surge seen in private sector investment continued in Q1/FY19
- Mega projects declined sharply from 68 to 36.
- Slowdown in government spending in Q1/FY19
- Gujarat attracted 19 percent of the total fresh projex
- Karnataka was the most preferred destination of private investors.
- Irrigation the most neglected sector
- Private sector shuns investment in mining
- Automobiles, Electronics and Real Estate to attract more private investments
- Government will step up infra investment in the coming months.
- Good monsoon, stabilised GST regime, revival in rural demand augurs well for projex in India.
As per the 71st Projex Investment Survey conducted by Projects Today, 2,424 new projects were announced in the first quarter of the current fiscal (Q1/FY19). Around 238 more projects than the 2,176 projects announced in the preceding quarter.
However, the same buoyancy was not seen in fresh project investment. The sharp fall in the number of mega projects (investment of Rs 1,000 crore or more) dragged down the fresh investment amount by 29.6 percent on Q-o-Q basis. The last quarter of the fiscal 2017-18 had seen announcement of 68 mega projects. This number came down sharply to 36 projects in the first quarter of the current fiscal. As a result, the total fresh projex came down from Rs 2,79,241.5 crore in Q4/FY18 to Rs 1,96,501.8 crore.
Fresh projex by the government sector, which is peddling the country’s projex cycle in the recent years, slowed down considerably in Q1/FY19. As a result, the total new projex by the government sector declined by 47.4 percent on Q-o-Q basis. This in return pulled down the overall growth in fresh investment by 29.6 percent.
As against 1,776 govt projects worth Rs 2,06,780.3 crore announced in Q4/FY18, around 1,856 new projects worth Rs 1,08,739.9 crore were announced in Q1/FY19. Again fall in the number of mega projects saw shrinkage in total quantum of fresh projex despite increase in number of new projects.
In the last quarter of 2017-18, the government sector had announced 45 mega size projects pledging investment of Rs 98,102 crore. The number of such mega projects came down to just 11 in Q1/FY19.
Private sector, which is showing some signs of revival in fresh investment announcements not only announced 168 more projects, but also saw fresh investment increase by a respectable 21.1 percent during the quarter ended 30 June 2018 on Q-o-Q basis. As against 400 new projects worth Rs 72,461.2 crore announced in the last quarter of 2017-18, 568 new projects entailing a total investment of Rs 87,761.9 crore were announced in Q1/FY19.
Among the major sectors, baring the Power sector, Manufacturing, Infrastructure, Mining and Irrigation sectors failed to enthuse project promoters and attract increased investment proposals.
Fifty-five new solar power projects entailing a total investment of Rs 32,037.8 crore accounted for nearly three-fifth of the total fresh investment attracted by the Power sector. This included a Rs 25,000 crore Solar power park project of Dholera Industrial City Development, in Gujarat.
Signs of revival in Manufacturing
Though it would be too early to predict a clear revival in projex activities, the Manufacturing sector showed some signs of revival in capacity expansion activities. Notwithstanding a fall of 8 percent in the total fresh investment, the 333 new Manufacturing projects with a total investment of Rs 41,912.7 crore accounted for 21.3 percent of the fresh investment announced during Q1/FY19. In the preceding quarter the sector’s share stood at 16.3 percent.
Infrastructure sector, comprising Social and Transport infrastructure projects, always accounted for a large portion of projects investment in India. Slowdown in government sector spending saw this vital sector’s share in total fresh investment pie shrinking from 73.7 percent in Q4/FY18 to 47.5 percent in Q1/FY19.
Irrigation, continued to be the neglected sector of the government and saw fresh investment decline by 50 percent on Q-o-Q basis. Mining sector, where private investment has declined in the recent years due to various reasons, attracted eight new projects worth Rs 4,753.3 crore. Bulk of the total investment was by the state owned ONGC and South Eastern Coalfields.
Gujarat the winner
Among the states, Gujarat ranked first by attracting 157 new projects worth Rs 37,395.8 crore of projex and cornered around 19.03 percent of the fresh investment announced in the country in Q1/FY19. The state was followed by Karnataka with 181 projects (Rs 26,572.8 crore), Andhra Pradesh with 147 projects (Rs 13,795.8 crore) and Maharashtra with 267 projects worth Rs 12,365.7 crore.
Karnataka, favourite of Private Promoters
However, in terms of private fresh projex, Karnataka topped the table with 123 new projects worth Rs 24,837.6 crore. The state attracted around 28 percent of the total fresh projex announced in Q1/FY19. It was followed distantly by Andhra Pradesh and Gujarat with 73 projects each worth Rs 9,500.7 crore and Rs 9,318.4 crore respectively. The three states together accounted for around half of the fresh private investment emanated in the first quarter of the current fiscal.
Projex in 2018-19
Good Monsoon, stabilised GST regime, good tax collections, revival in rural demand for consumer goods, continued government spending on highways building and other related infrastructures should see further pick up in project investment activities in India.
While sectors like Steel, Cement and Pharma are in the consolidation phase, Automobiles, Consumer Electronics, Industrial construction and Warehousing are the sectors where increased private projex will flow into in the coming months of the current fiscal. Telecom, once a sun rise sector, is currently in a very competitive phase wherein the top players are spending their resources in holding their existing market shares than expanding the same.
Increased central government spending could be expected in the transport infrastructure sector in the coming months, before the country enters the general election mode.