New investment projects down 68%

Despite the recovery seen during the second half of the year, new investment projects declined by 68 per cent in FY21. Government share in the new projects came down to 32 per cent last fiscal.

In FY21, new investment projects aggregated to Rs 5.18 lakh crore against Rs 16.28 lakh crore in FY20. This was also the lowest since

FY04, when total investment projects stood at Rs

4.73 lakh crore. Since

FY05, new investment projects were always above Rs 10 lakh crore each year with seven of them witnessing above Rs

20 lakh crore, as per data from Care Ratings.

New investment projects had stood at Rs 2.92 lakh crore in FY03 and it steeply went up to Rs

27.07 lakh crore in FY09. A trough was witnessed in the FY12-FY14 period when there was an increase in NPAs of banks and subsequently the quantum of stalled projects increased.

Until FY17, government companies dominated the mix with a share of 58 per cent. This has been coming down since then and in FY21 it was 32 per cent from 49 per cent in FY20.

The fall in investments in FY21 can be primarily attributed to the lockdown. The capacity utilisation rate had fallen sharply in June 2020 to 47.3 per cent and since then recovered to 63.3 per cent and 66.6 per cent respectively in September and December 2020.

Lower investments also indicate the increased borrowings witnessed last year was for working capital and refinancing purposes. Of the Rs 5.18 lakh crore, metal and metal products, electricity and chemical and chemical products accounted for major share of the new investment projects.

Investment is a concern because the gross fixed capital formation rate has been falling from 34.3 per cent in FY12 to 28.8 per cent in FY20.