In Charts: Anatomy Of India’s Private Corporate Investments
After a period of sluggishness, private corporate investments in India have shown a revival, albeit a modest one. The investment pick-up is expected to strengthen over the medium term, said an analysis by the Reserve Bank of India included in the central bank’s monthly bulletin.
“...the trend is expected to gather pace in the medium term, buoyed by the pipeline projects lined up by private corporates and efforts to strengthen balance sheets of both corporates and the banking sector,” the RBI said. “Improved capacity utilisation and business expectations in the first quarter of FY19 also indicate reinvigoration of investment activity.”
Data provided by the RBI give details of the projects approved over the last two years. The project data do not include central or state government driven projects. It includes only projects financed through banks, financial institutions, external borrowings and initial public offerings.
In the first half of 2018-19, a total of 451 proposals aggregating Rs 1.16 lakh crore were sanctioned through banks, financial institutions, external borrowings and IPOs, according to the RBI data. The implementation of projects approved span over a few years, which means the impact on the real economy plays out over time. As such, project proposals from previous years and in the current year will impact investment activity.
“On the basis of the pipeline projects sanctioned in preceding years, the planned capex could amount to Rs 79,200 crore in 2018-19, marking an improvement over the previous year Rs 68,500 crore,” the RBI said. “The level of corporate investment in 2018-19 from the new cohort of projects getting sanctioned in 2018-19 will also influence the aggregate capex for this year.”
In the full year 2017-18, 833 companies made investment plans aggregating Rs 1.99 lakh crore, against 916 companies with investment intentions totaling Rs 2.03 lakh crore in 2016-17.
The pace of project approvals continues to be far below the level seen in previous years. In 2010-11, for instance, 1,029 projects worth Rs 4 lakh crore were approved.
Details of the project proposals show that a majority of these are classified as ‘new’. The proportion of new projects rose in 2017-18, compared to those targeted towards expansion and modernatisation, shows the data.
An analysis of project size reflects the share decline in mega projects over the years. At the peak of the last investment cycle in 2009-10, 57 percent of the projects sanctioned by value were above Rs 50,000 crore. In 2017-18, the share of these projects was 18.6 percent, well below the peak but higher than the trough of 6 percent hit in 2015-16.
- The number of mega projects, of above Rs 50,000 crore, dropped to three in 2017-18 from five in the previous year.
- In 2017-18, 44 high value projects, between Rs 10,000 crore and Rs 50,000 crore, were sanctioned. The share of these projects in total cost stood at 44.1 percent.
- The ticket size (average cost of project) of mega projects rose in 2016-17 and 2017-18 from a trough in 2015-16, said the RBI.
A break-up of industries in which these projects are approved shows that chemical and chemical products saw a pick-up. This break-up is available for projects approved until last financial year and includes analysis of proposals sanctioned by banks and financial institutions.
- The chemical industry accounted for 11 percent of the total cost of projects in 2017-18, a significant rise over the average of 1.7 percent during the 2012-13 to 2016-17 period.
- The share of the construction sector decreased to 5.1 percent in 2017-18 from 12 percent in 2016-17.
- Within the infrastructure sector, the power sector continued to dominate, although its share dipped to 38.2 percent in 2017-18 from 45.4 percent in 2016-17.
Location of the projects shows that Maharashtra continues to retain its top spot, while Gujarat lost some share in the value of projects bagged.
- Maharashtra also accounted for 22.6 percent in terms of total cost of projects sanctioned by banks and financial institutions in 2017-18.
- Karnataka (10.4 percent) and Andhra Pradesh (9.7 percent) followed Maharashtra in the pecking order.
- Gujarat recorded a sharp fall in its share to 7.8 percent in 2017-18 from a 23 percent share in the previous year.
- The share of ‘multi-state’ projects declined in the recent period, probably reflecting the bottlenecks in obtaining clearances from multiple authorities, said the RBI.