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New investments slid 46% in Q3 as manufacturing, infra outlays shrank

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Image used for representative purpose only.

Image used for representative purpose only.
| Photo Credit: Reuters

Fresh investment plans almost halved between October and December 2023 from the previous quarter, with public capital expenditure projects tripping at a faster pace of almost 60%, while proposed private sector outlays fell 35%.

This marked the third successive quarter of sequential decline in new investment projects after they hit a record high in the fourth quarter (Q4) of 2022-23, data from investment tracking firm Projects Today show.

Proposed investments halved for all sectors barring electricity, with irrigation (down 75%) and manufacturing (61.5% lower) witnessing the sharpest drop.

Also Read | New investment slowed again in Q2 of FY24, drops by 13%

The decline in manufacturing investment plans came on the back of quarter-on-quarter drops of 77.6% and 2.3% in the first two quarters of 2023-24, respectively and was most pronounced in critical sectors such as automobiles (-63.8%), steel (-74.8%), and cement (-89%).

From around 30% of the ₹7.05-lakh crore of new investments announced in Q2 of this year, manufacturing projects accounted for just 21% or ₹80,000-odd crore of the ₹3.83-lakh crore investments planned in Q3. Overall investment plans dropped 45.7% quarter-on-quarter.

Monsoon, elections

The below-normal monsoon which has dented rural demand recovery and the upcoming Lok Sabha election might have made private companies hold back their new capex plans for a while, Projects Today CEO Shashikant Hegde told The Hindu.

Also Read | Q4 investments at all-time high of ₹14.6 lakh crore

“Moreover, reduced capex initiatives at the State levels, with a few States seeing elections and the Central government’s efforts to exercise fiscal restraint too contributed to this phenomenon. We expect announcements of fresh investment plans to remain tepid in the last quarter of 2023-24,” he said, noting that the global slowdown and uncertain geopolitical scenario are also concerns.

Mr. Hegde stressed that businesses will be keeping an eye out for the new government to take charge in the first quarter of the coming year, and its persistence with the current investor-friendly policies while unleashing more economic reforms that are required to keep the India growth story intact.

Fresh investments in the infrastructure sector, where commitments by the State and Central governments are the highest, fell for the second successive quarter on a sequential basis, contracting 56.1% in Q3 after a 10.9% fall in Q2. While new road projects slumped 56%, with 194 projects worth ₹25,904 crore, fresh railway investment plans plummeted by a much sharper 92.2%, with only 28 new projects announced between October and December worth ₹5,758.6 crore compared with 48 projects worth ₹74,000 crore in the previous quarter.

Also Read | India registered strong investment performance in 2023; headwinds in China from struggling property sector: UN

“After registering a growth of 66.7% in the last quarter of 2022-23, the quarterly announcement of fresh investment by the Central government sector declined by 18.5%, 46.6%, and 72% in the first three quarters of this year, respectively. In all, during the October-December 2023 period, 175 new projects worth ₹29,751 crore were announced in this sector,” as per the latest quarterly investment survey from Projects Today. “The Central government seems to have opted for fiscal consolidation by restraining the initiation of new projects in this fiscal,” it noted.

The value of new mining projects also dropped 53.7% sequentially to ₹5,813 crore, but the construction sector saw a relatively milder decline of 21.5%, with 675 projects worth ₹81,350 crore announced in the third quarter.

Maharashtra on top

Among the States, Maharashtra emerged as the top investment destination in Q3 with 470 new projects worth ₹1.04-lakh crore, followed by Karnataka (₹43,383 crore), Uttarakhand (₹34,024 crore), and Gujarat (₹31,379 crore). These four States accounted for 56% of the total new investments announced between October and December.

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