Fresh investment proposals surged sharply in the second quarter of this year, rising 107% over the first quarter, with 2,219 new projects entailing an investment of ₹2.19 lakh crore.
Private sector investments also recovered significantly, rising 87% from the previous quarter when an extensive lockdown triggered a 23.9% contraction in the economy.
On a year-on-year basis, fresh investments between July and September were still 11.32% lower, but marked a sharp recovery from investments in the first quarter that were nearly 73% lower.
Among the States, Chhattisgarh received the highest investments in the second quarter followed by Tamil Nadu, which had topped fresh investments in the first quarter, according to Projects Today’s latest report on investment announcements in the July to September quarter. Karnataka was third in the list followed by Gujarat and Maharashtra.
Chhattisgarh’s total investments in the quarter of ₹35,771 crore were boosted by the ₹22,653 crore Bodhghat irrigation project and public sector coal mining projects worth ₹8,200 crore. Tamil Nadu received 132 projects worth ₹23,332 crore in the same period.
Projects Today director and CEO Shashikant Hegde said it would be too early to proclaim the return of normalcy, but the impressive increase in fresh investment proposals, increased tendering activities and a sharp jump in the number of finalised project contracts in Q2 vis-à-vis the preceding quarter indicates a bounce back in projects investment activities in India.
Labour, supply chains
“The project implementation ratio (projects investment under execution as percentage of total outstanding investment) improved by a tad, from 37% in Q1 to 37.53% in Q2. This indicates that at ground level, project execution has not gained much traction in the second quarter. The pain issues like scarcity of labour, supply chain disruption and liquidity persisted in Q2 too,” Mr Hegde told The Hindu.
Private sector investments in the second quarter were just 7% down from a year ago, with 618 new projects worth ₹83,608.2 crore. This was almost double the 315 new projects worth ₹44,714.6 crore announced in Q1, but still far less than the average quarterly investments of ₹1.69 lakh crore and ₹1.32 lakh crore in 2018-19 and 2019-20, respectively.
While the surge in fresh projects investments was spread across all major sectors, the growth registered in the manufacturing sector was very interesting, the firm noted in its quarterly project monitoring report. Fresh manufacturing investments rose 31.3% from the previous quarter and were even 19.8% higher than the second quarter of 2019-20.
“In all, 315 new projects worth ₹35,195.68 crore were announced in Q2, of which about 96% came from private promoters,” the report noted. A solar cells and modules project of Vikram Solar in Tamil Nadu worth ₹5,423 crore was the largest private manufacturing investment announced, followed by Edison Motors electric vehicles project in Uttar Pradesh worth ₹5,000 crore.
As many as 98 new pharma and drug projects were announced, most of which were to produce Active Pharmaceutical Ingredients, or APIs, currently imported from China. Jubilant Generics’ ₹864 project to make APIs and pharmaceutical intermediates in Karnataka was the largest pharma bet in the quarter.
Infrastructure continued to account for half of all fresh projects in the second quarter, rising from 1,085 projects worth ₹58,583 crore in Q1 to 1,751 projects worth almost ₹1.16 lakh crore.
Real estate and construction, one of the largest job creators in recent years, also saw a recovery of sorts with new project announcements reverting to virtually the same levels as a year ago.
“Although the staggered unlocking of the economy in Q2/FY21 did not lead to increase in the pace of project execution due to labour and liquidity issues, the announcement of new projects gained momentum,” the report said.
New commercial realty projects doubled from 224 (worth ₹7,326 crore) in Q1 to 450 projects worth ₹33,969.3 crore in Q2. In the second quarter of 2019-20, 451 new projects worth ₹30,371.7 crore were announced.