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Tags Current Affairs

New investments in FY 2020 fall to 15 year low

Date: 22 November 2019 Tags: Reports & Indices

Issue

The value of new investment projects in the first half of the current financial year has fallen to a 15-year low of ?1.9 lakh crore, according to care rating.

 

Background

In the first half of FY20, stalled projects aggregated to 29,214 crore, 66% lower than the 86,623 crore in the corresponding period last year.

The analysis showed that the overall investment climate, as denoted by new projects undertaken, did indicate a slowdown.

 

Details

  • The analysis by economists of the rating agency revealed that there has been a sustained decline in new projects undertaken in the past five years.

  • The amount for such projects was pegged at ?11.9 lakh crore in FY19, the lowest in the past five years and also marks the fourth consecutive year of contraction.

  • The investment rate measured as the gross fixed capital formation (GFCF) as a percentage of GDP has declined consistently over the years and remained range-bound between 28% and 29% of GDP in the past 4 years.

  • This has been a detrimental factor for the overall economic growth of the country.

  • The government’s share in such investments declined from 56% in FY15 to 36% in FY19, while that of the private sector rose from 44% to 64% in the same period.

  • In the first half of FY20, new investments by the private sector contracted by 77%, compared with a 23% growth in the first six months of the previous financial year.

  • New investment projects were mainly seen in the manufacturing sector but services and electricity segments witnessed a decline in investments.

  • Stalled or abandoned projects declined over the last five years, though such government-owned projects increased.

  • Funding  will remain a challenge for some more time until the problems confronting the banking and NBFC sectors are addressed.

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