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Tuesday, October 19, 2021

India Inc’s dwindling investment plans: RBI flags near-term risks

Data on phasing plans for 2021-22 relating to projects in the pipeline point to persisting near-term risks to the investment outlook, the Reserve Bank of India said in a report.

Written by George Mathew | Mumbai |
September 18, 2021 3:47:40 am
The relative share of such projects although increased to 53.5 per cent in 2020-21 from 37.4 per cent in 2019-20, which indicates higher relative presence in the small cohort of projects sanctioned in 2020-21, it said.

India Inc’s investment plans took a severe beating when the Covid pandemic raged across the country in 2020-21 with the number of new projects sanctioned dwindling and projects already in the pipeline also slowing down.

Data on phasing plans for 2021-22 relating to projects in the pipeline point to persisting near-term risks to the investment outlook, the Reserve Bank of India said in a report. In all, banks and financial institutions sanctioned only 220 project proposals of the private companies during 2020-21, a record low in the recent years. The total cost of projects sanctioned too declined sharply to Rs 75,558 crore in 2020-21 from Rs 1,75,830 crore in 2019-20, the RBI said.

Altogether, investment plans of 576 projects were made during 2020-21 aggregating to Rs 116,603 crore as against 827 projects with investment intentions totalling Rs 271,374 crore in 2019-20. As many as 344 companies raised an amount of Rs 40,382 crore through ECBs and FCCBs and did not avail of any financing from the banks and FIs. Further, 12 companies did not avail of any bank finance or ECBs and FCCBs but raised Rs 663 crore for their capex needs through domestic equity issues.

The fresh sanction of projects in the first half of 2020-21 dwindled to 68 projects, a record low compared to 137 projects sanctioned during the first half of 2019-20, clearly indicating the role of Covid, the RBI said. The majority of banks and FIs reported ‘Nil’ projects during the first half of 2020-21, which points to very subdued investment climate of private corporate sector owing to pandemic induced uncertainties.

“The second half of 2020-21 showed some signs of recovery in terms of number of projects, which got financial assistance from the banks and FIs, though the investment climate remained subdued in terms of total cost of projects sanctioned by these entities,” it said. According to the RBI report, the size-wise distribution of projects showed a noticeable decrease in the number of mega projects (Rs 5,000 crore & above) from five in 2019-20 to one in 2020-21 along with a decrease in its combined share in the total project cost. Similarly, the number of large projects of size Rs 1000 crore-5000 crore declined from 36 (in 2019-20) to 24 in 2020-21.

The relative share of such projects although increased to 53.5 per cent in 2020-21 from 37.4 per cent in 2019-20, which indicates higher relative presence in the small cohort of projects sanctioned in 2020-21, it said.

Data for the last five years (2016-17 to 2020- 21) revealed that more than half (52.3 per cent) of the projects were taken up in five states — Gujarat, Maharashtra, Karnataka, Andhra Pradesh, and Tamil Nadu. In 2020-21, Rajasthan and Gujarat each accounted for the highest share (17.1 per cent) in the total cost of projects sanctioned by banks/FIs followed by Andhra Pradesh (15 per cent), Uttar Pradesh (13.7 per cent) and Maharashtra (8.5 per cent), it said.

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