Investment proposals dip 14% in Jan-Sep on slack demand, economy slowdown

Number of proposals decline to 1,528 till September

Amid slowing economy and slack demand, investment proposals garnered by states dipped 14.6 per cent to 1,528 in January-September 2017 as compared to 1,749 proposals in the past year.

In value terms, the investment intents showed a marginal dip from Rs 3.38 lakh crore to Rs 3.32 lakh crore in the same period, says Care Ratings study.

With 44.4 per cent share, Karnataka led the pecking order in the investment chart, followed by Gujarat (19.8 per cent), Maharashtra (7.5 per cent), Andhra Pradesh (7.2 per cent) and Telangana (3.2 per cent).

In terms of IEMs (Industrial Entrepreneurs Memorandum) implemented, including the spillover proposals of previous years, the pace was slower by 41.6 per cent. 

Projects valued at Rs 57,566 crore are being implemented in the period under review compared with Rs 81,553 crore in the comparable period of the previous financial year.

"The overall investment climate in the country remains subdued. This is represented by declining capacity utilisation as well as capital formation. The government is the more active participant here but with some degree of front-loading in the first half of FY18,  there would be limited space for acceleration given the commitment to meet the  3.2 per cent fiscal deficit target”, the report stated.

The slowdown in investments has been persisting since 2012-13 with both gross capital formation and capacity utilisation coming down sequentially. From 33.5 per cent in 2012-13, the gross capital formation has tapered to 27.5 per cent at the end of June 2017. Likewise, capacity utilisation of industrial projects reviewed in the period has slowed from 74.8 per cent to 71.2 per cent.

Between 2011-12 and 2016-17, government spending enthused with a CAGR (compounded annual growth rate) of 10.6 per cent, but the same was not enough to reverse the downtrend in capital formation, the report says. In the same time span, gross fixed assets of private companies and PSUs (public sector undertakings) rose by a CAGR of 8.7 per cent while gross fixed capital formation moved up by 6.5 per cent. 

The study sampled 3,864 companies in the corporate sector.

While the government spending, especially on infrastructure has been growing, private sector investments have trailed due to lacklustre demand. During April-September of FY18, the government expenditure on capital account stood at Rs 1.46 lakh crore, 8.14 per cent higher than Rs 1.35 lakh crore in the same period of FY17.