The economic slowdown, fall in demand, more so in rural areas, unearthing of financial irregularities in large banks and NBFCs and sharp decline in Central government projex (projects expenditure) spending reversed the growth in fresh projects announcements seen in FY19 and such investment declined by 35.6 percent Y-o-Y basis in FY20.
While the quantum of fresh investment declined in both private and government segments in FY20, the deceleration in the government sector was steeper.
Among major sectors, barring Mining, which accounts for just 5.8 percent of the total fresh projex announced in FY20, other sectors like Manufacturing, Power, Infrastructure and Irrigation recorded a fall in fresh projex.
During the 12 months’ period ended 31 March 2020, the project funnel increased by 6.84 percent and the project implementation ratio inched up from 33.2 percent in March 2019 to 36.7 percent, a five-year high figure.
Maharashtra and Gujarat topped the table in attracting both total projex as well as private projex in FY20.
These are the key findings of the 78th Survey of Projects Investment in India, conducted by Projects Today in the first week of April 2020.
Fresh Projex by Ownership
Slowdown in fresh projex announcements by the Central government agencies in the last two quarters pulled down the overall growth rate in fresh projex in FY20. This led to a sharp fall of 44.8 percent in the government projex announcements on Y-o-Y basis.
During FY20, government agencies announced 6,231 new projects with an aggregate projex value of Rs 5,57,450 crore as against 8,198 projects worth Rs 10,09,063 crore in FY19.
In FY19, government agencies invested heavily in Refinery, Steel, Power, Roadways, Railways, Ports, etc. However, in FY20 Y-o-Y increase in investment was seen only in the Community Services and SEZ sectors. All other major infrastructure categories posted negative growth in fresh projex.
The private sector during FY20 announced 3,076 new projects with a total investment commitment of Rs 5,28,282 crore. When compared with the FY19 statistics it indicated a fall of 22 percent on Y-o-Y basis, a comparison with such figures for FY18 (Rs 3,82,264 crore) and FY17 (Rs 3,43,941 crore) indicates willingness of the sector to build new capacities given a conducive environment.
While private investment declined in the Refinery, Automobiles, Metals and Machinery sectors in FY20, sectors like Hydel Power, Hospitality, Ports, Real Estate, Commercial Complexes received increased investment proposals. Among the other sectors, sizeable new investment intentions were seen in the Cement, Pharma and Mining sectors. A mega port expansion plan at Mundra, Gujarat by Adani Ports, expansion of Dhamra Port, Raniganj Oil Exploration project of Great Eastern Energy and Sukhpura Hydel Power project of Greenko Energies were some of the mega projects announced in the private sector.
Fresh Investment by Sectors
Among major sectors, the effect of the overall slowdown in investment was more on the Manufacturing sector. As against Rs 4,90,183 crore in the form of 1,630 new projects in FY19, the sector managed to attract only 1,147 new projects worth Rs 1,44,497 crore in FY20. All major sub-sectors like Petroleum, Metals, Cement, Automobiles and Machinery saw sharp deceleration in fresh investment proposals. Given the current uncertain situation, the dim scenario is expected to continue during FY21 too.
Infrastructure, which accounted for bulk of the fresh investment planned in the country in the last couple of years, saw fresh projex declining by 23 percent Y-o-Y basis in FY20. Within the sub-sectors, the fresh projex intentions lined up in FY20 in the Roadways and Railways sectors could not match the huge investment plans announced in FY19. In these two vital sectors, the yearly decline in total fresh investments was 58.1 percent and 59.2 percent respectively. In FY20, the national highways builder NHAI announced 92 new projects entailing a total investment of Rs 52,034 crore as against 218 new highway projects worth Rs 1,55,896 crore taken up in the preceding fiscal.
Thanks to a couple of new projects announced by private promoters, the Shipping Infrastructure sector registered a yearly growth of 33.5 percent in fresh investment in FY20.
The Community Services and Water Supply and Effluent treatment sectors saw good increase in fresh investments. A bulk of the projex in these sectors emanate from state government agencies and government local bodies.
The Power sector saw some interesting developments during FY20. While fresh investment proposals in the non-conventional power sector declined by 45.9 percent on a Y-o-Y basis, the Hydel power projects segment saw healthy rise in new projex. A bulk of the new investment proposals were by private companies. Greenko Energies, India’s one of the leading renewable energy companies, announced its intention to invest around Rs 30,000 crore in three mega Hydel power projects in Rajasthan, Madhya Pradesh and Maharashtra. The state-owned thermal power major, NTPC also announced a couple of hydel power projects with a total investment of Rs 5,300 crore.
The Irrigation sector, where almost all investment intensions are proposed and executed by state government agencies, saw new projex decreasing by 44.2 percent. In FY20, in all 203 irrigation projects worth Rs 23,862 crore were announced.
The Mining sector was the only major sector to register positive growth (39.3 percent) during the fiscal ended on 31 March 2020. The sector attracted healthy investment proposals from both the private and government sectors. Within the sector, the Petroleum Oil & Gas and Metallic Ores sectors saw some mega investment proposals.
Fresh Investment by States
A little more than half of the total fresh investment of Rs 10,85,731 crore announced during FY20 would be housed in top five states – Maharashtra, Gujarat, Andhra Pradesh, Odisha and Karnataka.
Maharashtra topped the table both in terms of number of projects and investment planned therein. The state attracted 1,393 new projects worth Rs 1,96,512 crore. Gujarat followed with 982 projects worth Rs 1,74,995 crore.
Maharashtra was also the most preferred destination of private project promoters in FY20. In all, the state attracted 719 new private projects with a total investment commitment of Rs 1,06,922 crore. It was followed by Gujarat (Rs 1,02,346 crore), Odisha (Rs 50,000 crore), Rajasthan (Rs 44,857 crore) and West Bengal (Rs 35,299 crore). Together, the top five states cornered 64 percent of the total new private project emanated in FY20.
Project Funnel (as on 31 March 2020)
The projex funnel (outstanding projects investment) increased by 6.84 percent during FY20. As of 31 March 2020, there were 74,149 projects entailing a total investment of Rs 1,54,02,668 crore (USD 2.18 trillion) in various stages of implementation. Of this, 17,372 projects with a total projex exposure of Rs 5,651,934 crore (USD 800 billion) were under execution, indicating a project execution ratio of 36.7 percent.
An indicator of the pace of transfusion of projects from the Planning stage to the Under Implementation stage, the project implementation ratio improved from 33.2 percent in March 2019 to 36.7 percent in March 2020. This is the highest project execution ratio recorded in the last five fiscal years.
Despite increase in share of the private sector in the fresh projex announcements during the last couple of years, the overall share of the private sector in the total outstanding projects investment remained low at 31.7 percent. The state and Central sectors accounted for bulk of the aggregate outstanding projex with a combined share of 68.3 percent.
Another matter of concern, indicated by the latest Survey, was the falling share of the Manufacturing sector in the total outstanding projects investment. The all-important sector’s share has come down continuously from 20 percent in March 2015 to 16.1 percent in March 2020.
Among the states, Maharashtra ranked number one both in terms of number of total projects and outstanding projex. The state cornered around 12.2 percent of the total planned projex. It was followed by Andhra Pradesh with a share of 8.74 percent.
Gujarat was the most preferred investment destination of the private sector. The state has cornered around 13.1 percent of the total outstanding private projex in India as of 31 March 2020. It was followed by Odisha (11.73 percent) and Andhra Pradesh (11.66 percent).
The nationwide three-week lockdown announced from 21 March 2020 not only paused manufacturing activities but also disrupted the services sector. While the project tendering activities continued during the lockdown period and the country saw floating of 1,881 projects tenders during March 2020, fresh investment announcements almost halved.
The second phase of 19 days lockdown till 3 May 2020, has further affected the economic activities. Since, the effect of Corona pandemic is expected to remain for the next couple of months, fresh investment activities will remain dormant in H1/FY21.
If the government manages to come out of the deadly Corona pandemic with limited damages to mankind and economy by say end June 2020, we could see some revival in investment activities by the government agencies in Q2/FY21. However, revival in private investment, one can expect only at the fag end of FY21.
Under such circumstances, the onus of peddling the Indian projex cycle will be on the government. In the last week of December 2019, the Central government announced a mammoth investment plan under the National Infrastructure Pipeline (NIP) scheme. Under the programme a total sum of Rs 102 lakh crore would be spent between 2019 and 2025 in sectors like Energy, Transport, infrastructure, Urban and Rural Infrastructure, Agriculture Infrastructure, Health, Education, etc.
A speedy execution of the 6,500 projects listed in NIP is one of the major solutions available with the government to revive economic growth, create jobs and instill confidence in the private sector to take up capacity building programmes on large scale. Though, it is going to be a Herculean task, with meticulous planning and continuous monitoring of the progress of projects it can be accomplished.