 "Pvt sector investment in FY23 fell to Covid-year levels, govt's share up")
The private sector’s share in infrastructure investment in financial year 2022-23 (FY23) reverted to the level seen during the pandemic in 2020, according to the latest National Accounts Statistics data released on Monday.
The share of private non-financial corporations in gross fixed capital formation (GFCF, a proxy for infrastructure investments) dipped to 36.2 per cent in FY23 compared to 36.3 per cent in FY22.
Investments by private financial corporations was at 0.7 per cent in FY23, unchanged from the earlier fiscal.
Public non-finance corporations or public sector companies’ (PSUs) share in investment continued to decline, a trend which began since FY19. PSUs’ share in FY23 was 9.4 per cent, lowering by one percentage point from 9.5 per cent in FY22. PSUs’ share in GFCF was 9.7 per cent, 10.2 per cent, and 11.6 per cent in FY 21, FY20, and FY19 respectively.
The government’s share in GFCF in real terms went up to 13 per cent in FY23 from 12 per cent in FY22. However, this share was lower when compared to the 13.9 per cent in FY21.
The share of the household sector in investment also came down to 40.5 per cent in FY23 from 41.4 per cent in FY22. But this share was higher than the 38.8 per cent and 39.5 per cent of FY21 and FY20.
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As percentage share of gross value added by economic activity, real estate accounted for 17 per cent of the total investments in real terms, up from 16.5 per cent in FY22.
It was followed by manufacturing activities at 16.9 per cent, which witnessed a significant drop of 1.6 percentage points from 18.5 per cent in the previous fiscal.
Even the investments in agriculture stood at 15.3 per cent in FY23, lower by 0.3 percentage points from 15.6 per cent a year-ago period.
Communication and services related to broadcasting witnessed their share increase to 4.9 per cent from 4.4 per cent earlier, whereas the share of construction declined as the investment in the sector shrunk.
Decline in private equity investments in India
In March, ‘Business Standard’ reported that private equity (PE) investments in India fell to a 6-year low at $24.2 billion in FY24. Investments via PE deals were down 47 per cent compared to FY23, when private equity deals worth $45.8 billion were signed.
PEs signed 960 deals in the 2023-24 compared to 1,334 transactions in 2022-23.
In the fourth quarter of FY24, private equity investments had amounted to $1.9 billion, indicating a 43.5 per cent substantial decline from $3.35 billion in the year-ago period.
According to a Reserve Bank of India report, the net foreign direct investment fell by 31 per cent to 13.5 billion dollars in FY24 till November from 19.7 billion dollar in the same period in FY23.
Meanwhile, disinvestment by foreign investors in India rose by 28 per cent to 25.5 billion dollars in the first eight months of FY24, up from 19.8 billion dollars a year earlier.
Private sector investment plans drop
A recent report by investment tracking firm Projects Today revealed a decline in fresh investment plans by the private sector, dropping by 15.3 per cent in 2023-24. Foreign investors also reduced new outlays by nearly a third, resulting in a nearly 5 per cent decrease in the value of new investment announcements compared to the all-time high of almost Rs 37 trillion recorded in 2022-23.
The most significant decrease in private sector investment plans was observed in the manufacturing sector, where proposed outlays plummeted by 40 per cent from Rs 19.85 trillion in 2022-23 to under Rs 11.9 trillion in 2023-24, as reported by ‘The Hindu’.
Manufacturing's portion of new investments declined from nearly 54 per cent in 2022-23 to 33.8 per cent of the Rs 35.22 trillion outlays announced last year. Investments in irrigation and mining saw declines of 48.7 per cent and 19.25 per cent, respectively, while the electricity and infrastructure sectors experienced increases of 96 per cent and 22 per cent, respectively, according to the report.
The report added that in contrast, state governments led in capex growth, increasing spending on new investment projects by 27 per cent to almost Rs 7.69 trillion, while the value of fresh projects by the central government rose by 8.4 per cent to Rs 6.09 trillion.