The study on "Foreign and Domestic Investment Proposals in Industry: a survey of trends in 1998-99" by Assocham has revealed that institutional factors such as limited availability of investment credit for funding new industrial projects in individual sectors was one of the significant reasons for this surprise shift.

If the present indicators are in any way a precursor of the emerging trends in the flow of domestic and foreign investments, Assocham president K P Singh said "it would call for immediate steps for identification of the current constraints and even a reworking of the policy framework in the industrial sector."

In tune with the broad recovery trends in the overalleconomy, the total amount of investment proposals filed with the ministry of industry -- under the industrial entrepreneurs memoranda and letters of intent- went up by around Rs 17,372 crore in 1998-99. This is an increase of almost 28 per cent as against 0.5 per cent growth in the previous year. However, the gains were restricted to the domestic sector. The FDI proposals in industry (excluding services), on the other hand, went down by around Rs. 7,961 crore in 1998-99 a slowdown of around 20 per cent as compared to the 8.7 per cent decline in the previous year.

An industry-wise break-up of the figures of the domestic investment proposals in 1998-99 shows that the increase in proposals was restricted to a few sectors and that the recovery evaded most of the important industries.

The sugar industry -- where new investment proposals went up by Rs 13,200 -- alone accounted for around two third of the total increase. The three other industries where investment proposals increased by more than a thousandcrore in 1998-99 included electrical engineering (Rs 3,173 crore), metallurgical industry (Rs 1,156 crore) and agriculture machinery (Rs 1,058).

On the other hand, new investment proposals in a major sector like fuel increased by only Rs 230 crore. And other sectors of considerable interest of domestic industry like chemicals, textiles, cement, paper and pulp and transportation saw the amount of new investment proposals go down by amounts ranging around Rs 1,000 crore to Rs 5,000 crore.

The distribution of new domestic investment proposals in 1998-99 was however much more skewed in their geographical spread. Despite the 27 per cent increase in overall domestic investments at the all India level, the amount of new investment proposed declined in seven of the ten leading states that had attracted most of the domestic investment proposals in the 1990s. New investment proposals in 1998-99 declined most sharply in Tamil nadu (Rs 5,192 crore), Uttar Pradesh (Rs 3,35), Gujarat (Rs 3,246 crore), West Bengal (Rs2,491 crore), Andhra Pradesh (Rs 1,565 crore) and Haryana (Rs 1,125 crore).

Among the major states, the Assocham study notes that only Maharashtra and Madhya Pradesh saw a significant increase in new investment proposals from domestic industry in 1998-99. On the other hand the increase in new domestic investment proposals only ranged between Rs 17 crore to Rs 315 crore in the other eight other states that registered a positive growth during 1998-99.