Page 16 - CII Artha Magazine

Domestic Trends
Investment
Trends
I nvestment is a crucial Overall new investments in
the economy have slowed to
determinant of productivity
in the economy and can be a Rs 3.26 lakh crore in Q2FY23
differentiating factor in from Rs 4.39 lakh crore in
whether an economy the previous year, recording
experiences a healthy growth a sequential decline of
rate or not. 25.8 per cent.
Since the onset of the A breakup shows that
pandemic, the government investment in both the public
has taken the lead in pushing and private sectors have
capex projects to revive experienced a sequential
growth in the economy. There decline in Q2FY23, with new
are signs that the private investments made by the
sector is also working in government falling at a much
tandem with the government faster pace as compared to
for kickstarting the that by the private sector. The
investment cycle which is new investments made by the owing to the uncertainty
critical for economic growth, private sector in Q2FY23 hovering over the global
although the momentum still stood at Rs 3.1 lakh crore as
needs to pick up. compared to Rs 0.2 lakh which new investments by
crore made by the Indian companies have
This section analyses in detail government. continued to lose steam in
the recent trends in Q2FY23. The recent increase
investments based on the The slowdown in government in interest rates and
CMIE Capex Database, which sector project execution has
would help assess the impact especially been in the roads
of recent initiatives being sector. For instance, according
taken by both the to government estimates,
government and industry to road construction that was
facilitate investment revival. progressing at the rate of 40
kms per day, till recently, has
New now slowed down to about 8.0
20 kms per day. The major
6.0
Investments reasons for the slowdown 4.0
have been delays in land
acquisition, delayed payments,
0.0
and dispute resolution delays
OVERALL NEW leading to financial stress.
INVESTMENT
REPORTS A At the same time investment
SLOWDOWN IN in the private sector, while
Q2FY23 higher than that of the
government in Q2FY23, is still
16 ANALYSIS, RESEARCH, THOUGHT LEADERSHIP & ADVOCACY
QUARTERLY JOURNAL OF ECONOMICS
DECEMBER 2022
much below potential. This is dampener, forcing companies
to postpone some of their
planned expansion. This trend
environment as a result of is also reflected in the
OBICUS survey done by the
RBI, where the capacity
utilization (CU) for the
manufacturing sector
decelerated to 72.4 per cent
slowdown in developed in Q1FY23 from 75.3 per
countries is seen to be a cent in the previous quarter.
Trend in New Project Announcements (Rs lakh crore)
10.0
6.3 4.0
2.0 2.2 3.1
Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q3FY21 Q4FY21 Q1FY22 Q2FY22 Q3FY22 Q4FY22 Q1FY23 Q2FY23 Despite the decline in new
Government Private sector Total
Source: CMIE capex database & CII Research
Note: Data extracted on 10th October 2022
This is corroborated by the much above the pre Ministry September FY23 September FY22
previous graph which shows
pandemic levels.
Capex April-
Capex April-
that new investments made
by the government, both at
MANUFACTURING
(Rs crore)
(Rs crore)
the centre and the state
levels, have come down SECTOR CONTINUED Department of 6212.5 4426.1
TO ATTRACT PRIVATE
significantly during in the first
INVESTMENT IN
Atomic Energy
two quarters of FY23 as
Q2FY23
compared to new public
investments made during the
corresponding period in FY20 Despite the uncertainty, the Ministry of 88548.3 46261.9
Railways
indicating that public manufacturing sector has
investments have yet to continued to attract higher
achieve pre-pandemic levels new investments in Q2FY23. Ministry of Road 121893.2 73787.1
of growth. On the other As per the CMIE capex data, Transport &
Highways
hand, the slowdown the sector recorded 21.5 per
experienced in new cent more investments in the
investments made by the quarter. Among the key Ministry of 293.8 126.1
Shipping
sectors, chemical & chemical
private sector before the
pandemic (Q1 and Q2 of products, electricity, services
FY20) was reversed as it (other than financial) and Source: CGA
picked up significantly in FY22. information technology
Thus, new private attracted higher investments
investments, despite the in the quarter. This is also corroborated by Electricity sectors
slowdown in FY23, remain data from CMIE capex which include investments in
again alludes to a rise in renewable electricity
government capex. (solar power projects)
Accordingly, the top sectors and services (other than
Top sectors attracting private attracting investments in financial) include mainly
investment in Q2FY23 (Rs lakh crore) Q2FY23 include electricity, those of transport
2.50 services (other than financial), logistics services and
2.2 1.9 communication services, tourism.
2.00 information technology and
1.50 transport services.
1.00
0.7
0.50 0.2
0.00 0.1 Top sectors attacting higher government
Manufacturing Chemicals & chemical Electricity Services (other than Information investments in Q2FY23 (Rs crore)
products financial) technology
12000.0 11,005.2
Source: CMIE capex database & CII Research 10000.0
Note: Data extracted on 10th October 2022 8000.0
6000.0
4000.0 3,945.2
1,256.3 1,202.0
2000.0 600.0
GOVERNMENT robust rise. In fact, according 0.0 Electricity Services (other than Communication Information Transport
services
technology
financial)
services
to data released by CGA,
CAPEX REMAINS overall government capex has Source: CMIE capex database & CII Research
ROBUST SO FAR gone up by 49.5 per cent Note: Data extracted on 10th October 2022
during April-September FY23
compared to last year. Key
ministries attracting higher
public investments, at the capex include that of atomic Going forward, improvement pace and would also
aggregate level capital energy, roadways, railways and in fresh investments would indirectly help tame
expenditure made by the shipping. ensure that the economy inflationary pressures in
government has witnessed a keeps growing at a healthy the country.
ANALYSIS, RESEARCH, THOUGHT LEADERSHIP & ADVOCACY 17
QUARTERLY JOURNAL OF ECONOMICS
DECEMBER 2022