According to a Bank of Baroda report, fresh investments in projects by India Inc increased by 2.93% to $80.42 billion in the first quarter of FY24 compared to $78.52 billion in the same period of the previous fiscal year.
The transport sector accounted for the majority share of around 74% of the overall investments, with the airline industry being the largest contributor within this segment. The power sector followed with a 10% share, while chemicals, machinery, and auto sectors contributed 8%, 3%, and 2% respectively.
The report noted that this recovery resembled a ‘U’-shaped pattern compared to the corresponding quarters of FY15. While this upward trend is encouraging after the decline in investments in 2019 and 2020, it is still lower than the levels seen in 2016 and 2017.
However, the report mentioned that the investments announced in Q1 of FY24 were limited to a few sectors and not broad-based. It also highlighted that investments in the airline industry, which mainly involve aircraft purchases, may not generate significant backward linkages with other sectors, benefiting primarily global aircraft manufacturers.
In terms of fund-raising from bond markets, Indian corporates raised $31.26 billion in Q1, compared to $13.24 billion raised in the same period the previous year. The financial sector accounted for nearly 89% of the funds raised, with asset financing companies representing 72% of the total. Non-finance companies raised limited funds, with construction and electricity sectors at 4.1% and 2.4% respectively.
Data on bank credits indicated higher growth at 15.4% in the first two months of the quarter, driven by agriculture, services, and personal loans. However, credit growth in the industry sector lagged behind at 6%, suggesting that most loans were utilized for working capital rather than investment purposes.
Overall, the report highlighted the need for broader-based investment growth and emphasized that the government still has a crucial role to play in driving investments.
