Capex blues: New project announcements plunge to multi-year low in Q1

Private companies announced projects worth  ₹35,206 crore in the quarter, while the figure for the government sector was  ₹24,725 crore. Photo: Mint
Private companies announced projects worth 35,206 crore in the quarter, while the figure for the government sector was 24,725 crore. Photo: Mint


  • New project announcements in India fell below 1 trillion in a quarter for the first time in 20 years, likely due to election uncertainty, with renewable energy emerging as a bright spot.

After an unimpressive show in 2023-24, the appetite for capital investments in India decreased further in the first quarter of the new fiscal year. The value of new project announcements plunged to a multi-year low, with economists largely attributing it to the seven-phase general elections.

Companies announced 59,931 crore worth of new projects across the country during the quarter, the lowest in over a decade and down 92% year-on-year, showed the latest data from the project-tracking database of the Centre for Monitoring Indian Economy (CMIE). The data is provisional and can be updated later.

Private companies continued to lead new investments in the June quarter, but they, too, fell below 1 trillion for the first time since the June quarter of 2020, which saw a hit due to the covid-led nationwide lockdown. Private companies announced projects worth 35,206 crore, while the figure for the government sector was 24,725 crore.

Elections are accompanied by the model code of conduct, which halts much of government activity and leaves companies waiting. In 2023-24, capital expenditure announcements declined by 31% to 27.1 trillion.

New investments were down across the board. Manufacturing, which saw the highest sequential jump in the preceding two quarters, took the biggest hit, dropping from over 7 trillion (lakh crore) in the March quarter to 20,568 crore. Other sectors including electricity, construction and real estate, and services experienced sequential declines of 84-93%. The latest data for the mining sector was not available.

Poor for an election year, too

While new investments were dismally low in the June quarter, historical data shows that a weaker investment mood is typical of the first quarter of a fiscal year, and that the trend is more pronounced in Lok Sabha election years. However, among election years, too, this marks the first time since April-June 2004 that overall new announcements have fallen below 1 trillion.

"While the new project announcements typically see a seasonal dip in Q1 (April-June) vis-à-vis Q4 (January-March), the new numbers are particularly low, partly owing to the general elections as well as a very high number in January-March 2024 ( 12.4 trillion)," said Aditi Nayar, chief economist at Icra Ltd. She added that these figures are subject to upward revision and should be interpreted with caution.

Meanwhile, project-wise investment data reflects the focus on the country’s growing sustainable energy grid. The renewable energy sector led the top five announcements in the June quarter. Two central government solar power projects for Solar Energy Corp of India and NHPC Ltd, each worth 7,800 crore, were announced in the quarter. Two other private proposals in Rajasthan, one for a wind power plant project and another related to a solar power plant, worth 2,412 crore and 4,500 crore, respectively, were among the biggest ones.

All eyes on the budget

Earlier this year, the Indian government’s provisional budget included a higher allocation to capital expenditure in the ongoing fiscal year. Estimates showed that capital expenditure would increase to 3.4% of the projected nominal GDP in 2024-25 from 3.2% of GDP in 2023-24. However, project completion figures in the June quarter reveal that work has begun at a snail's pace.

The value of projects completed during the quarter was about 33,581 crore, less than the projects worth 35,513 crore completed during the same quarter of the pandemic year 2020. The costliest completed projects in the June quarter were Shree Cement Ltd’s integrated cement project ( 2,500 crore) and a solar power project by Agar Solar Park in Madhya Pradesh worth 2,275 crore.

As India moves past the elections, the coming quarters will be crucial in determining whether the investment slowdown is a temporary blip or signals economic challenges. The post-election budget, due this month, could look to restore investor confidence.

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