Punjab has failed to capitalise on its core benefits, thereby leading to a dismal economic growth scenario considering that new investments attracted by the state registered a fall of over 63 percent year-on-year (Y-o-Y) i.e. from over Rs. 7,200 crore in 2013-14 to just about Rs. 2,600 crore in 2014-15, noted a just-concluded study by apex industry body ASSOCHAM.
"However, new investments attracted by states across India have increased by over 44 percent Y-o-Y i.e. from about Rs. six lakh crore in 2013-14 to over Rs. 10 lakh crore in 2014-15," pointed out the study titled 'Impact of delay in investment implementation in Punjab,' conducted by the ASSOCHAM.
"Despite boasting of a robust infrastructure base, Punjab has failed to lure investors over the years evidently as the new investments attracted by the state reached its peak level of Rs. 36,650 crore in 2007-08 which had declined to a meagre Rs. 2,600 crore in 2014-15 thereby registering a fall of about 93 percent," said D.S. Rawat, national secretary general of ASSOCHAM while releasing the chamber's study.
Punjab had attracted total outstanding investments worth just over Rs. two lakh crore as of 2014-15, with services sector accounting for 39 percent share followed by electricity (31 percent), construction and real estate (23.5 percent), manufacturing (six percent) and irrigation (one percent).
Gurdaspur-Rupnagar is the most sought-after region for investors in Punjab as the region accounted for about 33 per0cent of the total outstanding investments attracted by the state as of 2014-15 followed by Amritsar-Patiala (27 percent), Firozpur-Sangrur (20 percent) and other multi-regions (20 percent).
302 projects with investments worth over Rs. 1.6 lakh crore i.e. 75 percent of the total outstanding investments attracted by Punjab as of 2014-15 have remained non-starter with services sector accounting for 40 percent share of these followed by construction and real estate sector (30 percent), electricity (26 percent), manufacturing (three percent) and irrigation (one percent).
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Out of the 302 projects that have remained non-starter, about 140 have either reported cost or time overruns.
Poor execution of 52 investment projects has pushed up their costs by over Rs. 41,900 crore i.e. almost 45 percent of their actual cost of over Rs 93,390 crore, highlighted the study prepared by the ASSOCHAM Economic Research Bureau (AERB).
While 60 projects have reported time overrun ranging between 1-157 months.
Projects in non-financial services sector have garnered highest share of about 50 percent in projects reporting cost escalation followed by electricity (39 percent), construction and real estate (six percent), manufacturing (three per cent) and irrigation (two percent).
While projects in construction and real estate sector have reported maximum cost escalation to the tune of 72 percent of their actual cost followed by non-financial services (67 percent), irrigation (64 percent), manufacturing (42 percent) and electricity (40 percent).
Ownership wise, private-sector owned projects have highest share of about 69 percent in total projects that have reported cost escalation while state government-owned projects accounted for 28.5 percent and the Central Government owned projects accounted for the remaining share.
Private-sector owned projects have also reported highest cost escalation of 70 percent followed by state government owned projects (35 percent) and the Central Government owned projects (28 percent).
A sharp decelerating trend has been observed vis-a-vis growth performance of Punjab's economy as the state's overall economic growth had declined from over 10.2 percent in 2006-07 to five percent in 2014-15, highlighted the ASSOCHAM study.
Punjab's contribution to Indian economy has also declined from 3.3 percent in 2004-05 to three percent in 2013-14 and has remained at the same level during the course of past four years.
Though, agriculture is mainstay of Punjab's economy, however its contribution in the state's gross state domestic product (GSDP) has declined significantly from the level of about 33 percent in 2004-05 to just over 20 percent in 2014-15 owing to factors like monoculture of wheat-paddy crop rotation, stagnation in yield of principal crops, declining farm incomes, rural indebtedness, natural resource constraint, degradation of soil health and falling groundwater table which has made the sector less remunerative.
As such, ASSOCHAM study has suggested for greater focus on research and development, crop diversification and rural non-farm activities to restore the fast waning glory of agriculture sector.
Even industrial sector has registered sharp decline in growth performance i.e. from peak level of 21 per cent in 2006-07 to just two percent in 2014-15.
Though services sector has been the largest contributor to Punjab's GSDP, thereby accounting for about 53 percent share but growth per year in this sector has also decelerated from its peak level of about 12 percent in 2011-12 it had dropped to nine percent in 2013-14 but picked up slightly to reach 10 percent in 2014-15.
Punjab holds ample potential for growth and expansion of services sector, as such policymakers should aim to expand export related services to generation additional economic activity and more employment opportunities in the state, suggested the ASSOCHAM study.