Q1 investment: Manufacturing stuttered, private sector share slipped

Q1 2023-24 saw private investors become cautious, with manufacturing investment plans down 17.5% year-on-year. Government investments rose 80.9% to ₹3.93 lakh cr, pushing private sector's share below 50%. Maharashtra led with ₹2.38 lakh cr, followed by Karnataka, Gujarat, UP and Telangana. Private sector's project implementation ratio at 30.92%, lower than public sector's 36.55%.

Private investors turned cautious in the first quarter of 2023-24, with fresh manufacturing investment plans shrinking 17.5% year-on-year and overall project outlays rising just 4.7% to ₹3.88 lakh crore, according to Projects Today.

While the April to June period (Q1) recorded a sharp sequential decline in investment plans announced by private players — from a record high of ₹10.5 lakh crore in the previous quarter — proposed outlays by the Centre and State government did the heavy lifting.

An 80.9% year-on-year surge in public investments — which crossed ₹3.93 lakh crore during the quarter — brought the private sector’s share in fresh investment plans below the 50% mark for the first time after 13 quarters of dominance. The share of private investment plans in the first quarter of 2022-23 stood at 63% and had risen to 72% between January and March 2023.

While investments planned by domestic industry rose 5.55% from a year ago, foreign investors’ investment plans grew just 1.8% to a tad over ₹84,000 crore.

“The private sector lost steam and the manufacturing sector, which dominated fresh capex plans in recent quarters, saw a drop in terms of project numbers as well as investments proposed,” noted Shashikant Hegde, Projects Today director and CEO. “This quarter belonged to the government sector, with Central government projects rising over 122% to ₹1.93 lakh crore and State projects surging 53.3% to cross ₹2 lakh crore,” he said.

Despite their insipid 4.7% rise in Q1, fresh investment announcements by the private sector are expected to remain positive in the next three quarters, according to Mr. Hegde. More importantly, the project implementation ratio — that is, the translation of investment intent into money on the ground — needs to improve.

“At present, the ratio for private projects under implementation is hovering around 30.92% vis-à-vis 36.55% seen in the public sector,” he emphasised.