In the first week of April 2009, ProjectsToday conducted its 34th Survey of Projects Investment in India. The Survey was carried out across a record 29,628 projects entailing a total investment of Rs.42,35,484 crore (approx. US $850 billion).
The latest Survey not only tried to gauge the overall trends in projects investment during the 12 months ended March 2009 but also made an attempt to look into the trends in fresh investment announcements during the fiscal 2008-09.
Reflecting the global economic crisis which broke out around June 2008 in the USA and hit the Indian shores in the second half of the fiscal 2008-09, projects investment activities in India declined alarmingly since September 2008.
The effect of financial meltdown was pronounced on private sector projects investment intentions. The sudden collapse of international financial markets abruptly dried up the cheap source of international funds on which most of the private players depended for funding their big ticket projects.
Further, the contraction in demand for Indian goods and services from developed countries and tightening of terms and conditions by NPA-wary Indian financial institutions and banks for funding projects shook the business confidence of private investors. This not only led to large-scale shelving of projects during the third quarter of the fiscal 2008-09 but also saw less number of new projects being announced in the second half of the fiscal.
Though the Indian public sector was less affected by the global slowdown, many of its projects identified for development with the private sector could not take off for want of support from private developers.
Total Outstanding Investment (as of 31 March 2009)
- Total outstanding projects investment at Rs.42.35 trillion was up 37.4 per cent on Y-o-Y basis.
- The increase in investment intensions was seen across the major sectors
- Bulk of the increase in projects investment came in the first half of 2008-09
- The Services and Utilities sector recorded the highest growth rate of 43 per cent among the major sectors
- The overall Project Implementation Ratio at 42.9 per cent hovered at last year's level
- The Project Implementation Ratio was the highest in the Irrigation sector at 84.8 per cent followed by the Manufacturing sector (43.8). In other sectors, the ratio was lower than the national average
- Maharashtra once again emerged as the number one destination for projects investment by cornering 11.4 per cent of the total envisaged investment in India
- Tamil Nadu which was nudged out by West Bengal last year from the top five league, re-entered the elite list by scoring over West Bengal both in terms of number of projects and investment planned theirin
Fresh Investment: April 2008 - March 2009
- During the 12 months period ended March 2009, 12,533 new projects entailing a total investment of Rs.8,62,634 crore were announced
- As against 7,112 new projects worth Rs.5,78,912 crore announced in the first half of 2008-09, only 5,421 projects worth Rs.2,83,722 crore were announced in the second half of 2008-09
- The year saw announcement of 312 mega projects each envisaging investment of Rs.500 crore or more. Of this, 207 mega projects were announced in the first half and only 95 projects in the second half
- Maharashtra topped the list of states in attracting fresh investment announced during the fiscal 2008-09
Total Outstanding Projects Investment
As per the Survey, as of 31 Mar 2009, there were 29,628 projects worth Rs.42,35,484 crore. Compared with a year ago investment figures, this indicated a rise of 37.4 per cent in terms of investment and 29 per cent in terms of number of projects. As of March 2008, the country had 22,883 projects worth Rs.30,83,264 crore.
Though at the macro level this indicated continuation of the buoyancy in projects investment activities, a closer look at the monthly trends in fresh investment indicated that bulk of the growth came in the first half of the fiscal 2008-09 and the second half saw drastic slowdown in investment activities.
Sectoral Distribution
The Services & Utilities (Infrastructure) sector continued to be the growth driver with a share of 36.1 per cent in total investment. Compared with a year ago statistics, its share in total investment increased by around 1.5 percentage point. However, holdups in execution of proposed projects pulled down the implementation ratio from 44.5 per cent in March 2008 to 42.1 per cent in March 2009.
Projects Investment by Sector |
Sectors |
No. of Projects |
Projects Investment |
Y-o-Y |
Rs.Crore |
(% Inc.) |
Mar-07 |
Mar-08 |
Mar-09 |
Mar-07 |
Mar-08 |
Mar-09 |
Mar-08 |
Mar-09 |
| Manufacturing |
2,658 |
3,173 |
3,622 |
577,560 |
773,093 |
1,032,771 |
33.9 |
33.6 |
| Mining |
475 |
517 |
635 |
86,103 |
91,531 |
109,892 |
6.3 |
20.1 |
| Electricity |
1,231 |
1,321 |
1,566 |
765,050 |
978,141 |
1,339,422 |
27.9 |
36.9 |
| Services & Utilities |
13,849 |
17,224 |
22,687 |
963,191 |
1,068,413 |
1,528,298 |
10.9 |
43 |
| Irrigation |
581 |
648 |
1,118 |
149,563 |
172,086 |
225,101 |
15.1 |
30.8 |
| Total |
18,795 |
22,883 |
29,628 |
2,541,467 |
3,083,264 |
4,235,484 |
21.3 |
37.4 |
Though the private sector had shown increased interest in participating in India's infrastructure building process, the share of public sector in this sector remained very high at 71 per cent with bulk of its investment concentrating in building roads, laying railway lines and putting in place systems for providing potable water. Sizeable public investment was also seen in the Community Services sector.
The Electricity sector while maintaining its share at around 31.5 per cent for the last two years saw improvement in project implementation ratio from 35.3 per cent to 37.1 per cent. The year saw four UMPPs being awarded and one of them has achieved financial closures.
Shares & Implementation Ratios: By Sector
|
Sectors |
Share in Total Investments (%) |
|
Project Implementation Ratio (%)
|
Mar-07 |
Mar-08 |
Mar-09 |
|
Mar-07 |
Mar-08 |
Mar-09
|
Manufacturing |
22.7 |
25.1 |
24.4 |
|
46.4 |
41.9 |
43.8
|
Mining |
3.4 |
3 |
2.6 |
|
42.7 |
36.7 |
29.6
|
Electricity |
30.1 |
31.7 |
31.6 |
|
38.4 |
35.3 |
37.1
|
Services & Utilities |
37.9 |
34.7 |
36.1 |
|
41.4 |
44.5 |
42.1
|
Irrigation |
5.9 |
5.6 |
5.3 |
|
86.5 |
76.4 |
84.8
|
Total |
100 |
100 |
100 |
|
44.3 |
42.5 |
42.9
|
With the gap between demand and supply for power widening rapidly in the recent years, the private sector saw huge opportunities in setting up power plants. As a result, the share of private sector in the power sector rose steadily. As of March 2009, there were 1,566 power projects with a total investment of Rs 13,39,422 crore. These projects intend to add around 4,75,000 MW of additional generation capacity over the next 5-6 years. Nearly half of the investment envisaged in this sector was by private developers.
The 33.6 per cent growth seen in the Manufacturing sector was mainly because of the announcement of mega investment proposals in the Steel, Cement, Refinery and Automobiles sectors in the first half of the fiscal.
The investment boom witnessed in the Manufacturing sector since 2007 petered down in the second half of 2008-09. Of the 385 projects worth Rs 1,49,208 crore shelved in the second half of 2008-09, 198 projects worth Rs 1,28,409 crore were in this sector.
Projects Investment in Top 5 States* |
States |
No. of Projects |
Projects Investment |
Y-o-Y |
Rs.crore |
(% Inc.) |
Mar-07 |
Mar-08 |
Mar-09 |
Mar-07 |
Mar-08 |
Mar-09 |
Mar-08 |
Mar-09 |
Maharashtra |
3,061 |
4,211 |
5,981 |
262,264 |
320,141 |
483,348 |
22.1 |
51 |
Andhra Pradesh |
1341 |
1870 |
2,734 |
142,851 |
210,116 |
394,468 |
47.1 |
87.7 |
Orissa |
693 |
812 |
1,077 |
265,943 |
279,740 |
325,373 |
5.2 |
16.3 |
Gujarat |
859 |
1001 |
1,702 |
202,599 |
246,835 |
300,820 |
21.8 |
21.9 |
Tamil Nadu |
1,355 |
1,621 |
2,136 |
155,188 |
166,822 |
268,687 |
7.5 |
61.1 |
Total for above states |
7,309 |
9,515 |
13,630 |
1,028,845 |
1,223,654 |
1,772,696 |
18.9 |
44.9 |
Rest of India |
11,486 |
13,368 |
15,998 |
1,512,622 |
1,859,610 |
2,462,788 |
22.9 |
32.4 |
Total |
18,795 |
22,883 |
29,628 |
2,541,467 |
3,083,264 |
4,235,484 |
21.3 |
37.4 |
| *Ranked as of Mar 2009 |
During the same period, the list of top five states in terms of total investment also underwent some changes. In the first three years, Maharashtra, Gujarat, Orissa, Karnataka and Tamil Nadu were the leading investment destinations of India. However, in March 2008 Karnataka and Tamil Nadu were replaced by Andhra Pradesh and West Bengal. In March 2009, Tamil Nadu re-entered the elite list by replacing West Bengal.
Despite handsome growth in outstanding projects investment, states like Andhra Pradesh, Gujarat and Orissa could not dislodge Maharashtra from its premium position. As of 31 March 2009, the state with 5,981 projects entailing a total investment of Rs 4,83,348 crore cornered 11.4 per cent of the total investment planned in India. Apart from enjoying the top rank in terms of projects investment the state also has a steady and above all-India average projects implementation ratio.
During the Survey period, the state not only saw its total investment bulging by 50 per cent on Y-o-Y basis but also saw the project implementation ratio nudging up from 46.6 per cent in March 2008 to 47.5 per cent in March 2009
.
Shares & Implementation Ratios: By States |
States |
Share in Total Investments (%) |
|
Project Implementation Ratio (%) |
Mar-07 |
Mar-08 |
Mar-09 |
|
Mar-07 |
Mar-08 |
Mar-09 |
Maharashtra |
10.3 |
10.4 |
11.4 |
|
47.9 |
46.6 |
47.5 |
Andhra Pradesh |
5.6 |
6.8 |
9.3 |
|
55.1 |
50.9 |
55.3 |
Orissa |
10.5 |
9.1 |
7.7 |
|
25.7 |
23.8 |
31.9 |
Gujarat |
8 |
8 |
7.1 |
|
42 |
41 |
41.3 |
Tamil Nadu |
6.1 |
5.4 |
6.3 |
|
46.3 |
49.1 |
44.8 |
Total for above states |
40.5 |
39.7 |
41.8 |
|
41.7 |
41.4 |
44.9 |
Rest of India |
59.5 |
60.3 |
58.2 |
|
46.1 |
43.2 |
41.4 |
Total |
100 |
100 |
100 |
|
44.3 |
42.5 |
42.9 |
The second ranker Andhra Pradesh had entered the top five state league in March 2008 at 5th rank. An 87.7 per cent jump in total investment catapulted the state close to the top ranker Maharashtra in March 2009.
Orissa, the second ranker in March 2008, had to settle for the third place as during the Survey period number of mega steel projects in the state were put on the backburner by the promoters. As a result the total outstanding projects investment expanded by just 16.31 per cent during the year ended March 2009.
Gujarat saw its rank slip from 3rd to 4th during the Survey period. Though the state received around Rs.81,000 crore of fresh investment proposals during 2008-09, completion of around 88 projects worth Rs.31,644 crore led to a subdued growth of 27.8 per cent as against the national average of 37.4 per cent. However, the state can feel proud of the fact that it accounted for around 25 per cent of the total investment fructified during 2008-09 in the country. Further, among the top five states, Gujarat is the most favoured state by private promoters. Two-third of the total planned investment in the state was by private promoters. It is the other way in case of the leader Maharashtra, where two-third of the total investment is by the public sector.
A 61 per cent rise in total envisaged investments helped the southern state, Tamil Nadu to re-enter the top five state league. Bulk of the fresh investment the state received during the Survey period was proposed by state and central government owned agencies in the infrastructure sectors like Roadways, Railways, Ports and Community Services. The Thermal power sector also saw announcement of a few large size power projects.
Fresh Investments: April 2008 - March 2009
(First Half vs Second Half)
Fresh investment announcements exhibited continued buoyancy in the first half of 2008-09. This was cut abruptly and followed by slowdown in the second half due to the fallout of the turmoil in global financial markets and its impact on India. This intra-year contrasting developments in fresh investment announcements made us focus on the intra project profiles in the two halves of the fiscal.
The first half saw unprecedented boom in announcement of new projects by both private and public sector enterprises. In the second half, while the public sector continued its announcement binge, the private sector played a subdued role.
During 2008-09, the country saw announcement of 12,583 new projects involving a total investment of Rs 8,62,634 crore. Compared to 7,112 new projects worth Rs 5,78,912 crore announced in the first half of 2008-09, only 5,421 new projects worth Rs 2,83,722 crore were announced in the second half. This indicated a sharp fall of 23.8 per cent in terms of number and a whopping 51 per cent in envisaged investment. While fall in investment intensions was observed in both public as well as private sectors. The intensity of decay was more clear in the private sector.
Fresh Investment by Private & Public Sectors |
| Sectors |
Private Sector |
Public Sector |
First Half |
Second Half |
First Half |
Second Half |
Projects |
Rs.Crore |
Projects |
Rs.Crore |
Projects |
Rs.Crore |
Projects |
Rs.Crore |
| Manufacturing |
1,042 |
165,206 |
463 |
62,966 |
47 |
19,604 |
33 |
3,883 |
| Mining |
48 |
9,979 |
39 |
1,230 |
16 |
290 |
40 |
7,176 |
| Electricity |
146 |
131,907 |
107 |
45,305 |
72 |
50,828 |
63 |
44,275 |
| Services & Utilities |
2,411 |
44,997 |
762 |
25,456 |
3,117 |
144,372 |
3,613 |
86,448 |
| Irrigation |
0 |
0 |
0 |
0 |
213 |
11,729 |
301 |
6,984 |
| All Sectors |
3,647 |
352,089 |
1,371 |
134,957 |
3,465 |
226,823 |
4,050 |
148,765 |
The impact of the global meltdown with ripple effects felt in the domestic markets was so great on the private sector, as it depended largely on external funds to execute high ticket projects that during the second half of the fiscal 2008-09, both number of new projects and investment envisaged therein slumped by 62 per cent. This was made worse by 34.4 per cent drop in fresh public sector projects.
Thanks to the relatively small size roadways, irrigation, power distribution and water supply schemes announced by state government agencies, the number of new public sector projects increased by 16.9 per cent during the second half.
Sectoral analysis of fresh investment intentions indicated that the Manufacturing sector bore the brunt of the global meltdown. As against the first half of the fiscal 2008-09, the second half saw 54.5 per cent less projects announcements. Correspondingly, projects investments envisaged by new projects also declined by 63.8 per cent. Within the manufacturing sector, the most severely affected sectors were Textiles, Plastic Products, Paper, Cement, Steel, Machinery, Computer Hardware & Software and Automobiles.
In the Electricity sector, as against 218 projects worth Rs.1,82,736 crore announced during the first half of 2008-09, only 170 projects worth Rs.89,850 crore were announced during the second half. While the first half witnessed 41 new mega power projects, the second half saw the number of such projects dwindle to just 19.
Though the slowdown in the Services & Utilities (infrastructure) sector was not as sharp as was in the Manufacturing and Electricity sectors, the second half saw fresh investments halve as compared with the first half. This was mainly due to the severe contraction in investment activities in private sector-dominated projects like Commercial Complexes, Real Estate, Industrial Parks and SEZs.
Outlook 2009-10
While ProjectsToday expects the public sector to continue its projects investment activities during 2009-10 in the critical infrastructure sectors like Roadways, Water Supply, Electricity, Irrigation and Community services, the same cannot be vouched for the private sector, which appears to be waiting for some more concrete signs of revival to resume the capacity building activities. Given this situation, the pace of projects investment will remain moderate at least in the first half of 2009-10.
The success of the Gujarat government in attracting thousands of private investors during the last Vibrant Gujarat Global Investors' Summit amply shows their willingness to invest massive funds in the state and the recent sporadic announcements of large-size investment intentions by private promoters indicate that capacity building activities would pick up once the conditions normalise. Moreover, the outcome of the General Elections is perceived to be private sector and investment-friendly.
While the stimulation measures unveiled by the Central government and the monitory measures announced by the Reserve Bank of India in the recent past will take some time to show their effects on projects investment, in the mean time, the government should expedite its capex plans and try to facilitate private promoters in PPP projects.
Source : ProjectsToday
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