📷 Image Credits: The Hindu
In the first quarter of 2024, private investment plans in India hit a 20-year low with just ₹44,300 crore in new investment announced by corporates, marking a significant decline compared to the same period in recent years. The slow start to private capex in the current financial year reflects a cautious approach by investors, likely influenced by the ongoing Lok Sabha elections. The tepid investment levels in Q1 of 2024-25 seems to be a result of the industry adopting a wait-and-watch mode, despite the steady growth of the economy.
While the sluggish investment plans could also be attributed to the high levels of investment announcements in previous years that are yet to materialize fully. The slowdown in investment announcements was evident across sectors, with manufacturing leading the way with a 46.4% share of the investments announced in Q1. Additionally, data on corporate bond issuances and bank credit flows for the quarter also supported the trend of slowing investment plans.
It will be interesting to observe if there is a pick-up in investment activity in the upcoming quarters, especially after the Budget announcement in July. Factors such as a good monsoon and steady demand during the festival season could contribute to an increase in investment pace. The subdued investment trends are likely to continue until previous orders are fulfilled, especially in sectors like transport services and electricity.
Overall, the sluggish private investment plans observed in Q1 are indicative of a cautious outlook by investors, likely influenced by external factors such as elections and existing high levels of investment announcements yet to be realized. However, with potential growth stimulants like a favorable monsoon and demand surge during festive seasons, the private investment landscape in India could see a revival in the upcoming quarters.
