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84th Survey of Projects Investment in India State capex key to reversal of trend
By Mr. Shashikant Hegde, CEO, Projects Today

As per the 84th Survey of Projects Investment in India, after a fall of 18 percent in Q1/FY22, fresh investment increased by 14.86 percent in Q2/FY22 on quarter-on-quarter basis. The second quarter (July-September 2021 or Q2/FY22) saw announcement of 2,669 new projects with a total investment commitment of Rs 3,84,291.01 crore. During the first quarter of FY22, 2,199 new projects worth Rs 3,34,572.52 crore were announced.

The increase in new investment intentions by the Central government-owned PSUs and private promoters led to increase in both new projects and new investment planned therein in Q2/FY22. Further, lifting of restrictions on running public transport system, factories and offices following the fall in number of COVID-19 cases also enabled resumption of capex activities across the country.

In the second quarter ended September 2021, not only fresh investment turned positive, but also the other two indicators of capex activities – project tendering and project contracts registered impressive growth.

During Q2/FY22, 10,923 project tenders worth Rs 2,16,391.97 crore were issued indicating a rise of 52.68 percent on Q-o-Q basis. Similarly, the total amount of project contracts finalised increased from Rs 87,508.29 crore in Q1/FY22 to Rs 1,04,424.75 crore in Q2/FY22.

Growth: H1/FY22 vs H1/FY20

With fresh capex showing signs of limping back to normalcy, in this Survey we decided to compare the current first half figures of capex with the first half investment figures of FY20 (i.e. pre-COVID-19 period) and find out how far the country is from returning to pre-COVID-19 period.

Fresh Projex

During the first half of FY22 (i.e. April-September 2021 or H1/FY22) fresh investment grew by 13.42 percent on H1-o-H1 basis. As against the fresh investment of Rs 6,33,831.27 crore announced in H1/FY20, new investment of Rs 7,18,863.53 crore was announced in H1/FY22. However, in terms of number of new projects, the first half of the current fiscal saw 635 projects less than the total number of 5,503 new projects announced in H1/FY20. Further, the small growth seen in fresh investment is not spread across major sectors and states.

Mega Projects

Indicating the increasing appetite of the Private sector in capacity addition, the number of mega private projects increased from 42 (total investment: Rs 2,15,389.29 crore) in H1/FY20 to 70 (Rs 3,10,837.45 crore) in H1/FY22, recording a growth of 44.31 percent. The 70 mega private projects accounted for 43.24 percent of the total fresh investment announced in H1/FY22.

However, at the overall level new projects investment proposed through high-ticket projects increased by just 1.08 percent from Rs 4,00,291.88 crore in H1/FY20, to Rs 4,04,608.53 crore in H1/FY22. The lackluster growth in public sector investment also reflected in announcement of mega projects, which fell from 57 (Rs 1,84,902.59 crore) in H1/FY20 to just 16 (Rs 91,131.51 crore) in H1/FY22.

Projex by Ownership

A swift recovery in fresh investment by the Central government agencies in Q2/FY22 after a fall of 42.8 percent in the preceding quarter could not reverse the negative trend seen in the government sector in Q1/FY22 as new investment proposals from state government agencies continued their declining trend in Q2/FY22 too. As a result, the overall fresh investment by the government sector declined by 24.54 percent in H1/FY22 vis-a-vis H1/FY20 fresh investment statistics.

On the brighter side, private fresh investment not only maintained its Q-o-Q growth seen since Q2/FY21, but also surpassed the H1/FY20 figures in H1/FY22 by a healthy 48.94 percent. As against 1,955 new projects worth Rs 3,27,411.28 crore announced in H1/FY20, the first half of FY22 saw announcement of 2,012 new projects worth Rs 4,87,633.95 crore.

Private preference for investment was seen in Food Processing, Drugs & Pharma, Plastic Products, Electronics, Automobiles, Data Centres and Textiles. These were also the sectors to which the government extended incentives under the Production Linked Incentive (PLI) Scheme.

An Rs 60,000 crore Green Energy Giga Complex of Reliance Industries, an Rs 29,200 crore PVC plant of Adani Enterprises, an Rs 25,000 crore wind power project of JSW Energy, an Rs 18,000 crore passenger cars project of Maruti Suzuki and an Rs 15,000 crore data centre project of Microsoft Corporation (India) are the top five private projects announced in H1/FY22.An Rs 60,000 crore Green Energy Giga Complex of Reliance Industries, an Rs 29,200 crore PVC plant of Adani Enterprises, an Rs 25,000 crore wind power project of JSW Energy, an Rs 18,000 crore passenger cars project of Maruti Suzuki and an Rs 15,000 crore data centre project of Microsoft Corporation (India) are the top five private projects announced in H1/FY22.

Projex by Sectors

A comparison of investment statistics between H1/FY20 and H1/FY22 indicated that of the five major sectors, barring the Manufacturing and Electricity, other sectors registered a fall in both the number of new projects and investment committed therein. While the increase was the most impressive in the Manufacturing sector, the fall was the deepest in the Irrigation sector.

Manufacturing

Among the major sectors, Manufacturing recorded a stellar growth both in terms of new projects and investment planned therein. In H1/FY22, in all 1,212 new manufacturing projects worth Rs 2,78,606.6 crore were announced vis-à-vis 731 new projects worth Rs 86,168.12 crore announced in H1/FY20. As a result, the share of Manufacturing in the total fresh investment increased to 38.76 percent. Two years ago, the sector’s share stood at 13.59 percent. The sector saw announcement of 38 mega projects worth Rs 1,93,330 crore in H1/FY22.

Within the Manufacturing sector, Food Processing, Textiles, Pharmaceuticals, Electronics and Automobiles saw a sharp rise in new projects announcement in H1/FY22. All these sectors have been offered incentives by the Central government under the PLI Scheme. In addition to these sectors, Basic Metals like Steel, Aluminium and Copper also saw impressive increase in fresh investment.

Mining

Despite increase in fresh investment by Coal India and its subsidiaries, the total fresh investment announced in the Mining sector in H1/FY22 fell by 6.15 percent compared to H1/FY20 figures. As against Rs 40,608.04 crore of new investment intentions announced two years ago, the H1/FY22 period saw new investment of Rs 38,110.69 crore. Among the new coal mining projects, Central Coalfields worth Rs 5,198 crore, Barkasayal Mine Development Project and an Rs 5,136 crore Amrapali Opencast Coal Mining Project were the largest ones.

While a bulk of the fresh investment came from Coal India and its subsidiaries in the Coal Mining sector, Rungta Mines and the Odisha Mining Corporation announced two mega iron ore mining projects in Odisha.

Electricity

The Electricity sector managed to post a positive growth of 12.73 percent during H1/FY22 over H1/FY20, because of a healthy 27.78 percent growth in fresh investment recorded by the Non-Conventional Power sector. The new investment in the Conventional Power sector (Thermal, Hydel and Nuclear) declined by 20.2 percent during H1/FY22.

The increased preference expressed by the Central and state governments in setting up renewable energy power projects to fossil-based power projects saw rise in announcement of solar and wind-based power projects in recent years. The H1/FY22 period was no exception. During the first six months of FY22, 111 renewable energy power projects worth Rs 67,646.79 crore were announced. Of these, 98 were solar power projects.

Some of the large solar power projects announced in H1/FY22 were an Rs 5,500 crore project of NHPC in Rajasthan and Tamil Nadu, an Rs 2,400 crore project of Ircon International and an Rs 2,250 crore project of Acme Solar Energy in Rajasthan.

Infrastructure

While the Central government intends to spend around Rs 111 lakh crore on infrastructure building in India, at ground level barring a few sub-sectors like Water Distribution and Treatment, Roadways and new Data Center projects, all other sectors registered negative growth in fresh investment in H1/FY22 vis-a-vis H1/FY20. Consequentially, the total fresh investment in sector declined by 24.64 percent in the first six months of FY22.

A total of 689 water distribution and water treatment projects with an investment intention of Rs 27,638.5 crore posted a healthy growth of 58.64 percent vis-a-vis comparative investment figures of H1/FY20.

The announcement of new highway projects by the National Highways Authority of India (NHAI) helped the Roadways sector to post a whopping increase of 61.09 percent in H1/FY22. In all, NHAI announced 93 new highway projects and accounted for nearly two-third of the total fresh investment seen in this sector. Of the 93 new projects, 24 projects were of mega size. The top five highway projects of NHAI are:Of the 93 new projects, 24 projects were of mega size. The top five highway projects of NHAI are:

The National Highways & Infrastructure Development Corporation, the other major investor in the roadways sector, announced 48 new projects worth Rs 9,944.64 crore.

India’s exponential growth in data consumption and cloud computing in recent years has created huge demand for data centres. To meet this rising demand, investment in setting up data centres increased impressively since 2020. During the first six months of FY22, 19 more data centres were announced. Around Rs 34,500 crore will be invested in setting up these centres planned across major cities of India. Some of the large proposed data centres are:

Other major infrastructure sectors like Railways, Ports, Real Estate and Industrial Parks could not scale back to the H1/FY20 levels.

Irrigation

The fund-starved state government downscaled their investment outlays for Irrigation projects. As a result, fresh investment in irrigation projects declined sharply by 75.9 percent. As against 128 irrigation projects worth Rs 17,143.30 crore in H1/FY20 only 75 new irrigation projects worth Rs 4,129.24 crore were announced during H1/FY22.

Projex by States

The top five states — Gujarat, Maharashtra, Telangana, Karnataka and Odisha — together accounted for around half of the total fresh investment announced in H1/FY22. Gujarat topped the table with 612 new projects worth Rs 1,32,169.47 crore. Followed by Maharashtra and Telangana with total fresh investment of Rs 1,03,106.70 crore and Rs 55,670.30 crore respectively.

The two top states, Gujarat and Maharashtra, are the preferred destinations of private investors and have managed to attract most of the mega projects announced in the country. During H1/FY22, of the 111 new mega projects, 21 were located in these two states. While the 11 mega projects worth Rs 1,04,486.92 crore accounted for 79 percent of the total fresh investment attracted by Gujarat, 10 mega projects worth Rs 52,404.93 crore accounted for 50.83 percent of the total fresh investment attracted by Maharashtra.

The 13 percent growth recorded in outstanding investment over H1/FY20 was mainly because of increased fresh investment attracted by states like Telangana, Odisha, Haryana, Chhattisgarh and Uttar Pradesh. While the table topper Gujarat registered a meagre growth of 3.71 percent over the H1/FY20 figures, Maharashtra saw investment declining by 35.96 percent.

The 13 percent growth recorded in outstanding investment over H1/FY20 was mainly because of increased fresh investment attracted by states like Telangana, Odisha, Haryana, Chhattisgarh and Uttar Pradesh. While the table topper Gujarat registered a meagre growth of 3.71 percent over the H1/FY20 figures, Maharashtra saw investment declining by 35.96 percent.Projects Outlook

The explosion in the number of COVID-19 cases in the first quarter of FY22 forced state governments to declare partial lockdown. This led to fall in fresh investment announcement in that quarter. By end-August 2021 the severity of the pandemic started receding, which allowed state governments to permit limited economic activities and partial opening up of public transport systems. As a result, new projects announced gained pace in Q2/FY22.

Responding to the request of Union Minister of Finance Nirmala Sitharaman to front load their capex plans, the Central government companies and agencies upped their fresh investment from Rs 43,543.45 crore in Q1/FY22 to Rs 86,826.85 crore in Q2/FY22. Projects Today expects this trend to continue in the next two quarters of FY22. However, the same cannot be expected at state level, as most of the states are currently facing financial crunch. Projects Today also expect the increase seen in private fresh investment in the last five quarters to continue, albeit at slower rate. Sectors like Textiles, Pharma, Electronics and Data Centres will continue to attract both domestic and foreign investment in the second of FY22 and FY23.

With rapid vaccination, the economy is expected to open up further in the third quarter of FY22 and if the country escapes or manages the wrath of COVID-19 3.0 effectively, fresh investment activities would gain pace in the last quarter of FY22. To expedite this, the Central government should prioritise the timely implementation of the 8,000-plus infrastructure projects listed under the National Infrastructure Pipeline (NIP). In this direction, the recent announcement of the Union government to raise Rs six lakh crore through asset monetisation to part finance the NIP projects is a right move. However, the big question is how fast the government would manage to transfer those assets to private players and collect the much-needed money?

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