Private capital bets on Indian recovery; investment plans hit record high in 2021-22

India’s private sector bounced back sharply with major fresh investment plans on the drawing board in 2021-22, even as total investment project announcements hit a record level of ₹19.3 lakh crore in the year, almost 78% higher than pre-pandemic levels.

As per investment monitoring firm Projects Today’s latest survey, the private sector accounted for close to 69% of the proposed investments during the year, up sharply from pre-pandemic levels of about 49% in FY20 and just 30% in FY17 and FY18.

Despite a stated official push, public capex spending remained subdued, particularly among States, which could deter the execution of some of the proposed private investments.

As many as 4,745 new projects with a total investment commitment of ₹13,27,564 crore were announced by private players in the year, as much as 144.4% over FY20 levels. Private investment plans were spread across traditional sectors and sunrise industries such as green energy, electric vehicles, lithium batteries, data centres and warehousing, the Survey showed.

Terming the buoyancy in new project announcements over FY22 as a welcome development when the country badly needed huge capex spending to ensure a speedy, sustained economic recovery and more job openings, Projects Today director and CEO Shashikant Hegde said public spending needed to be ramped up urgently.

“The worrying factor is the slow pace of capex spending by the government sector, especially at the States level. Unless the government spending on infrastructure catches up fast, most of the private mega private projects will remain on the drawing board,” he told The Hindu.

The January-to-March quarter recorded a 32% jump in overall investment plans from the previous quarter, with 2,467 projects worth ₹5.46 lakh crore, compared to 2,719 new projects worth ₹4.14 lakh crore between October and December 2021.

Over the full year, 10,445 projects worth ₹19.27 lakh crore were announced, up sharply from the 8,551 projects worth ₹10.72 lakh crore in the pandemic-hit year of FY21.

Over the full year, Gujarat led the pack across States in terms of total investment plans announced by a wide margin, thanks to several mega investment projects announced by the Reliance group, the Adani group, and ArcelorMittal. The coastal State accounted for almost 30% of private investments in the year, and was followed by Maharashtra, Tamil Nadu, Odisha and Karnataka in total investment plans.

Tamil Nadu, however, emerged as the second-most preferred destination for private capital expenditure plans. The State, along with Gujarat, Haryana, Karnataka, Maharashtra, Telangana and Uttar Pradesh, also attracted a large chunk of fresh investments in sunrise sectors.

Manufacturing hopes

Breaking from a trend in recent years, India’s manufacturing sector attracted the highest fresh investments in the year gone by with the private sector accounting for 98% of these plans, Projects Today’s survey underlined.

“In all, 2,759 new projects with an aggregate investment of ₹8,08,159 crore accounted for 41.93% of the total fresh investment announced in 2021-22. Its share in total fresh investment was just 13.31% in 2019-20,” the survey showed.

As many as 98 of the 299 mega projects, entailing a capital expenditure of at least ₹1,000 crore, were in the manufacturing sector, accounting for an outlay of over ₹6 lakh crore.

Irrigation was the only sector to witness a decline in investments from ₹75,177 crore in FY21 to just ₹13,223 crore in FY22, which is 45% lower than pre-COVID levels as well. “Funds-starved State governments seem to have withheld their capital expenditure plans on new irrigation projects,” Projects Today reasoned.

In the employment-intensive construction sector, the overall picture was better, with fresh investments rising 34.5% over FY20, but commercial realty projects remained 13.5% below pre-COVID levels.