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Mr. Shashikant Hegde, CEO, Projects Today
Mr. Shashikant Hegde, CEO, Projects Today

Allround fall in fresh investment

Projects Today conducted its 76th Survey on Projects Investment in India in the first week of October 2019. The Survey findings show steep fall in fresh investment announcements in the quarter ended September 2019 (Q2/FY20) and further deceleration in project execution ratio. This does not augur well for the economy, which the government wants to grow at a faster rate so that India could become a USD five trillion economy.

To revive the slump in projects investment, in August and September 2019, the NDA government announced a number of investment-friendly measures. However, this would take a quarter or two for us to see some revival in private projects investment in India.

As per the Survey during Q2/FY20 fresh projex (projects expenditure) announcements declined by 37.23 percent on Y-o-Y basis. When compared with a quarter ago statistics the fall becomes steeper at 45.73 percent. The downfall in fresh projex came on top of the 34.58 percent fall recorded in the last quarter on Q-o-Q basis.

The project implementation ratio (total projex under execution as percentage of total outstanding projex) too came down from 34.19 percent in March 2019 to 33.83 percent in September 2019.

Fresh Projex – Q2/FY20

Steep declines in new investment activities by the Central government entities and the private sector led to a sharp fall in the overall fresh investment declarations in the second quarter of the fiscal 2019-20 (Q2/FY20).

Three of the five major sectors — Manufacturing, Mining and Infrastructure — registered sharp falls in fresh projex. While the power sector staged a comeback in Q2/FY20 with the announcement of some big ticket projects in the Thermal,Hydel and Solar Power sectors, the Irrigation sector also saw a couple of large-size projects being announced by state government agencies.

The Manufacturing sector, where bulk of the investment is announced and executed by Indian private companies, continued its dismal performance in Q2/FY20. The 224 new projects worth Rs 25,684 crore indicated a fall of 49.8 percent on Q-o-Q basis and a steeper fall of 73.49 percent on Y-o-Y basis. Within the Manufacturing sector, Food processing, Pharma, Chemicals, Metals, Cement and Automobile sectors witnessed sharp fall in fresh projex announcements. Textiles and Paper products were the only two sub-sectors to show some positive growth in fresh investments.

The Mining sector failed to retain positive growth in fresh investment it had registered in Q1/FY20. As a result, total fresh projex declined by a whopping 90.1 percent in Q2/FY20 on Q-o-Q basis.

In recent past, growth in new projects in the Electricity sector was seen only in the Solar-based power projects segment. However, Q2/FY20 saw announcement of a couple of mega power projects in the Hydel and Thermal based power segments too. As a result, total fresh investment increased from Rs 10,861 crore in Q1/FY20 to Rs 65,616 crore in Q2/FY20. Interestingly, the Rs 46,908 crore fresh investment announcements seen in the non-conventional Power sector was the highest fresh projex attracted by any sector during Q2/FY20.

In the last couple of years, continuous announcements by the Central government entities led to a healthy growth in the Infrastructure sector. However, the General Elections and the delayed presentation of full budget in July 2019, saw Central government agencies holding back their investment intentions in both Q1 and Q2 of the current fiscal. This pulled down the fresh investment proposals in the Transport Services sector both in terms of number of new projects and projex as well.

As against 615 new projects worth Rs 1,27,592 crore announced during Q1/FY20, only 857 projects worth Rs 23,168 crore were announced during Q2/FY20. Within the Transport sector, Roadways, Railways, Airports and Ports saw huge declines.

Commercial Complexes, Real Estate and Industrial Parks, where private sector plays a major role, saw a fall in fresh projex by 82.57 percent, 31.21 percent and 82.80 percent respectively in the second quarter on Q-o-Q basis.

On the other hand, sectors like Community Services, Water Supply and Water Treatment, where the state government agencies and local bodies are involved, saw a healthy increase in fresh investment proposals. Despite this, the Infrastructure sector as a whole saw fresh investment coming down to Rs 88,379 crore in Q2/FY20 from Rs 2,51,414 crore in Q1/FY20.

Falling Demand Dithers Private Investment

The slowing economy and continuously falling demand forced the private sector to put on hold their expansion plans. To make the matter worse, the expected sops from the government came a little late. By the time, the first half of the current fiscal was almost over.

In Q2/FY20, marked falls were seen in the private sector. Contractions were observed both in the number of new projects and investment planned therein. Fresh projex declined by 57.93 percent in the second quarter of the fiscal on Q-o-Q basis. As against 1,069 new projects worth Rs 2,09,731 crore announced in Q1/FY20, only 686 new projects worth Rs 88,230 crore were announced in the second quarter of the fiscal 2019-20.

During the last couple of years, it was the government which was pump priming the projex cycle in India with private players playing the supporting role. Given the current situation in the projects investment arena, the sharp fall in Q2/FY20 in the Central government projex upset the projects investment momentum. Though the full budget was presented in July 2019, no major projex announcements were seen in the Infrastructure area by government agencies in Q2/FY20.

Fresh Projex by States

Almost all major states barring Uttarakhand and Rajasthan saw a fall in fresh investments in Q2/FY20 vis-à-vis the first quarter. Though the top five states – Rajasthan, Maharashtra, Gujarat, Karnataka and Uttar Pradesh – cornered around 60 percent of the total fresh projex announced in the second quarter, the aggregate fresh projex attracted by these five states was less by 43.26 percent on Q-o-Q basis.

Projex Funnel

As of 30 September 2019, the country had a projex funnel of 72,980 projects entailing a total investment of Rs 1,53,36,848 crore with project implementation ratio of 33.83 percent. Project execution ratio in the private sector was a notch higher at 35.38 percent. Only one third of the total projex in the Government sector was under execution as of 30 September 2019.

The share of the Manufacturing sector in total outstanding projects investment slipped further to 16.16 percent in September 2019 from 16.58 percent in September 2018. Five years ago, the sector’s share was around 20 percent. The project execution ratio too declined from a high of 30.96 percent in September 2015 to 25.84 by September 2019.

A spate of shelved projects in recent years in the Electricity sector saw its share in total outstanding investment coming down sharply from 32.0 percent in September 2015 to 23.38 percent by September 2019.

On the other hand the share of Infrastructure investment in the total investment pie shot up from 39.7 percent in September 2015 to 54.5 percent in September 2019.

The spread of outstanding projects investment by ownership category indicated that the share of the Private sector investment came down sharply from 40.5 percent in September 2015 to around 33.4 percent by September 2019.


Although the number of investment-related reform measures announced by the Central government were the right policies to come out of the current slump in the economy, it came a little late and in installments. Hence, we could not see much improvement in investment sentiments in the first half of the current fiscal.

Further, we expect the government to unveil policy measures to prop up the falling demand, especially in rural India. Unless domestic demand increases, private promoters would not invest in new ventures or expansion of existing capacities.

With the Finance Ministry urging the Central ministries to expedite their capital expenditure plans in coming months, we expect fresh announcements from the Central government units to go up sharply in the next two quarters. State governments would continue to invest at their usual rates.

Though the captains of the private sector companies have welcomed the recent investor-friendly measures of the Central government, we will not see any major surge in announcement of large-size projects in the next two quarters.

The special tax rate of 15 percent offered to companies setting up new manufacturing units would spur increased investment in this sector, provided the country sees a steady revival in demand in coming months.

In the wake of the Finance Ministry’s recent request to Indian banks and financial institutions to increase their exposure to upcoming projects, Projects Today recommends setting up a Project Progress Monitoring Agency (PPMA) in the line of RERA to monitor the progress of those projects whose promoters have borrowed money from banks or from the general public. This would help lending agencies in monitoring the progress of projects which they have funded and would also help in detecting diversion or misuse of funds, if any, by fraudulent project promoters. Such close monitoring would also help the government in identifying areas where its interventions are required.


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