Business Desk, ETV Bharat: New investment proposals in India, both from the public and private sector, have hit their lowest levels in nearly 16 years after the Covid-19 pandemic hit the country, indicating that the sagging economy may not turn around anytime soon.
According to independent think tank Centre for Monitoring Indian Economy (CMIE), proposals worth Rs 58,700 crore were made for investments into the creation of new capacities during the quarter ended September 2020.
This is similar to the Rs 56,100 crore worth of investment proposals made in the previous June 2020 quarter, highlighting that new investment proposal continued to remain depressed despite significant relaxations in the economic lockdown during the second quarter.
Notably, before the lockdown, new investment proposals averaged Rs 3-4 lakh crore per quarter, said CMIE, adding that it could take a long time before new investment proposals climb up to these levels.
Cumulative new investment proposals in 2020-21 so far have been Rs 1.3 trillion. This compares with Rs 15 trillion in 2017-18, Rs 14.6 trillion in 2018-19 and Rs 14.2 trillion in 2019-20.
“We do not expect new investment proposals to cross Rs 5 trillion in this year. New investment proposals have never been lower than Rs 5 trillion since 2004-05,” said Mahesh Vyas, managing director and CEO at CMIE.
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The situation can change if the central government decides to make large investments into infrastructure, he added. “(Though) so far, the government has shown no signs or any inclinations to make large capacity-building investments this year.”
Interestingly, the slowdown in investment announcements has happened both at the private sector level as well as at the government’s end.
The Rs 25,800 crore investment proposals made by the governments, both central and the states, in the September quarter are the lowest made by them in any quarter in the past 16 years (since June 2004), noted CMIE. This translates into 44% of the new investment proposals during the period.
Similarly, the private sector investments stood at Rs 32,800 crore during the quarter, being the lowest since June 2004.
“The corporate sector does not have a good reason to expand capacities at this time. It is laden with excess capacity,” said Vyas. “Besides, there is considerable demand uncertainty… it is not clear when jobs and incomes will repair with earlier levels and return to a growth trajectory from there. Till then, corporates are likely to focus more on cost management than on expansion,” he added.
The biggest investment proposals announced in the September quarter include a multi-location Rs 7,000 crore solar power project in Rajasthan by Solar Energy Corporation, a Rs 5,400 crore solar cells manufacturing project in Chennai by Vikram Solar, a Rs 5,000 crore biotech and life sciences park in Bangalore by the Karnataka government, a Rs 3,250 crore solar power project in Telangana by Singareni Collieries, and a multi-location Rs 5,200 crore electric vehicle manufacturing plant in Uttar Pradesh by Edison Motor India.
