MUMBAI: Private capex, which has been the biggest missing link since 2013, is back on the horizon with new investment announcements jumping 15% on-year to Rs 15.1 trillion in the first half of the fiscal—the highest in a decade.
According to Care Ratings, new investment announcements were led by the private sector, accounting for as much as 88% of the total.
In the similar period in FY24, such announcements totaled Rs 13.2 trillion and Rs 14.2 trillion in FY23, said the Care Ratings report by its chief economist Rajni Sinha, without saying how much of the announcements in the past years reached the implementation stage.
While such announcements indicate the intentions of business enterprises, it is important to note that not all necessarily translate into actual investments. This is more so in the case of the so-called global investment summits that various states compete to conduct every alternate year where trillions worth of investments are announced and MoUs signed. Many studies have concluded that conversion rate from such events has been only in mid-single digit.
On the other hand, investment completions stood at Rs 4.1 trillion, up from a year ago. Higher investment completions during the June quarter boosted the overall investment completions for the year so far.
While the private sector leads in project announcements, when it comes to project completion, the public sector remains at the forefront, accounting for 63% of total investment completions during the first half of the current fiscal.
When it comes to states, available data show that Maharashtra leads both in the capex chart as well as project completions. Of the total Rs 15.12 trillion of announcements by 19 states, the state announced as much as Rs 2.96 trillion, which is 19.65% of the total, followed by Andhra Pradesh at Rs 2.76 trillion, or 18.3% of the total, Odisha at 2.014 trillion, or 13.3%, Rajasthan at 1.12 trillion, or 7.4%, Chhattisgarh at Rs 0.84 trillion (5.6%) and Karnataka at Rs 0.83 trillion.
When it comes to project completions too, Maharashtra leads with 14.2% or Rs 0.85 trillion share of the Rs 6.15 trillion worth of projects followed by Uttar Pradesh at Rs 0.38 trillion (9.4%), Gujarat at Rs 0.33 trillion (8.2%), Bihar at Rs 0.25 trillion (6.3%) and Tamil Nadu at Rs 0.23 trillion (5.8%).
Meanwhile the report also said the massive 40% jump in the Centre’s capital expenditure during the first half was led mostly by a massive spike in the allocation to the department of food and public distribution which rose to 8.6%, the highest in recent years. So far, Rs 0.50 trillion has been disbursed towards the department of food and public distribution, marking a notable increase over last year’s disbursement of Rs 0.39 trillion.
After adjusting for this massively increased capital outlay, the Centre’s capex rose only 29%. Among other components, roads and railways remained the top two areas of capex, with outlays for these rising by 21.7% and 5.6%, respectively and the top sectors of India Inc’s capex were oil & gas (19% share), power (15%), telecom (10%), automobiles & ancillaries (9%), iron & steel (7%) and non-ferrous metals (5.5%).