Investment Inc finally sets sail

Industry says the acceleration has just begun and the next couple of years should be busy in terms of investment. After almost six years of continuous decline in investments and belt-tightening by India Inc, a reversal — from steel, cement and textiles to fertilisers, power and rubber and food products — is underway.

At Rs 17,93,979 crore, the number of outstanding investment projects as of October 31, 2004, has shown a healthy 26.9 per cent jump compared to the year-ago period.

Since liberalisation, the implementation rate of investment proposals has been a poor 16 per cent. That said, while no projects were shelved in the August-October quarter, 22 of them (with planned investments of Rs 8,631 crore) were revived. This re-affirms the trend that, in the last six months or so, the number of revived projects has over-taken shelved ones.

Which are the sectors driving investment? Manufacturing takes the lead, with a growth of 72.3 per cent in investments compared to a year ago. The steel sector has been the star, with investments shooting up by 227.5 per cent compared to October 2003. Huge projects — including Posco’s (Rs 28,500 crore), Sterlite’s (Rs 12,500 crore), and Tata Steel’s (Rs 12,000 crore) — have lifted Orissa to the top of the investment table. The state now accounts for slightly over 10 per cent of the country’s total investment basket, beating Maharashtra’s 9.71 per cent and Gujarat’s 8.76 per cent.

Besides steel, aluminium has shown good growth, with announced investments of Rs 24,322 crore compared to Rs 12,966 crore a year ago.

The other sectors that have attracted investments include petroleum products, textiles, rubber and paper products. The power generation and shipping sectors have also seen healthy rise in investments.

However, investments in automobiles, tyres, and electrical machinery have contracted compared to the year-ago period. There’s been a modest growth of 2.3 per cent in investment in communication services. India’s investment rate has been growing at a dismal 4 per cent between 1990 and 2002, far below other emerging markets like China.