Finance Ministry says private, public investment picking up pace
The report pointed out that Central government capex increased by 59% during the quarter, while the States have increased their capex by 74.3% in the first quarter.
NEW DELHI: The Finance Ministry’s Monthly Economic Review indicates a sharp increase in both public and private investment in the first quarter of FY24. The report says that new investment projects announced in the first quarter of FY24 by the private sector were the highest in 14 years.
The Finance Ministry report citing the CMIE Capex database says that new investment project announcements by the private sector in Q1 of FY24 were 11.6% higher than that in the corresponding period of the previous year. According to it, the transport services industry saw massive project announcements accounting for 72% of the total new investment projects announced, followed by electricity and chemicals.
The report cites higher capacity utilisation along with double-digit growth in non-food bank credit as signals of positive intent of the private sector to undertake fresh investment going forward. According to an SBI report, credit uptake has shown a 19.7% growth in FY24 (till July 27).
Meanwhile, the report also pointed out that the Central government capex increased by 59% during the quarter, while the States have increased their capex by 74.3% in the first quarter.
“Enhanced provision for capital expenditure by the government is now leading to crowding in of private investment, as evident in the performance of various high-frequency indicators and industry reports which highlight the emergence of the green shoots of a private capex upcycle,” says the Finance Ministry report.
The monthly economic review for July expects the Production-linked Incentive (PLI) scheme and new-age sectors (such as green hydrogen, semiconductors, wearables and solar modules) to account for nearly 17% of the capex between FY23 and FY27.
The capacity utilisation in the manufacturing sector is now above its long-run average, signalling the need for additional capacity creation as demand sustains the domestic economy, says the finance ministry.
“A pick-up in capex expenditure has ensured that infrastructure-linked sectors, such as roads, railways, telecom etc., have seen a jump in the disbursement of bank credit,” says the report.
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