Investment projects bounce back in Q4: report

Project execution rate highest since March 2021; private sector and government-backed capital spending taking off

Fresh investments rebounded strongly in the last quarter of 2020-21, with both private sector and government-backed capital spending taking off sharply for the first time in the pandemic-hit year, even as the project execution ratio, which denotes actual ground-level action, hit a five-year high.

The Q4 surge drove up the overall fresh investments in 2020-21 to ₹10.72 lakh crore, just 1.2% below the 2019-20 levels, although investments had plummeted sharply that year from ₹16.87 lakh crore in 2018-19.

New project investments in the January to March 2021 quarter hit almost ₹4 lakh crore, nearly ₹1 lakh crore or 33.4% higher than the previous quarter, according to the latest Projects Investment Survey by Projects Today.

The government’s push for capital expansion finally translated into new projects getting off the ground rising 21.8% during the quarter, after an 11.3% dip in the Centre and States’ investment announcements in the third quarter. Over 1,700 new government projects were announced in Q4, with the Centre accounting for projects worth ₹76,185 crore and State agencies pushing projects worth ₹91,067 crore.

Path to normalcy

“The Centre’s investment stimulus since March 2020 and the RBI’s liberal monetary policy have helped hasten the recovery in projects investment activities. While we are still far from the high growth in projects investment in 2018-19, the last two quarters’ trends indicate the journey towards normalcy has begun,” said Shashikant Hegde, director and CEO of investment monitoring firm Projects Today.

The fresh surge in COVID-19 cases and the spate of lockdowns would certainly be an impediment in the return to complete normalcy, so the government should step up its investment plans, intensify the vaccination drive and extend support to the private sector to sustain the growth in project investments through 2021-22, Mr. Hegde said.

Private sector investments grew by a sharp 43.5% over Q3 to ₹2.26 lakh crore in Q4, with manufacturing investments rising by a healthy 40.6% on top of the 88.4% quarter-on-quarter growth in Q3.

Mining was the only major sector where investments dried up in the quarter.

Odisha received the highest investments in the quarter of ₹62,352 crore, driven largely by the ₹50,000 crore integrated steel plant announced by Arcelor Mittal Nippon Steel. Maharashtra and Andhra Pradesh followed with projects worth ₹40,902 crore, and ₹39,610.92 crore, respectively.

Real estate revival

“518 new manufacturing projects entailing a total projex of ₹1,11,458.89 crore were announced in Q4, of which 12 were mega projects (with a cost of ₹1,000 crore or more) promising to bring in investment of ₹74,999 crore,” the report said. Overall, the quarter recorded as many as 87 mega projects taking off, up from 62 such projects in Q3.

Infrastructure projects, that had been rising since Q2 of the lockdown-affected year, continued to rise, while the Construction sector, where project execution activities came to a complete standstill following the nationwide lockdown last year grew for the first time in the year.

After a 20.3% dip in Q3, Real Estate, Commercial Complexes and Industrial Parks grew 47.4% in Q4, with fresh investments in real estate more than doubling from ₹15,634.6 crore in Q3 to ₹38,905.4 crore in Q4.

Food processing, cement and automobile sectors recorded a decline in investments in Q4, but drugs & pharma as well as industrial alcohols continued to grow healthily in the wake of the pandemic.

5-year high

An indicator of the pace of projects execution at ground level, the project implementation ratio improved from 36.69% in March 2020 to 37.64% in March 2021. This is the highest project execution ratio recorded since March 2016, the report said.

“The projex funnel (outstanding projects investment) increased by 6.2% during 2020-21. As of 31 March 2021, there were 78,271 projects entailing a total investment of ₹1,64,37,923 crore (or $2.22 trillion) in various stages of implementation. Of this, 17,709 projects with a total projex exposure of ₹61,87,368 crore ($835 billion) were under execution, indicating a project execution ratio of 37.64%,” it pointed out.

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