Though the government has just concluded a very successful Make-in-India event where, according to official figures, over Rs 15.2 lakh crore of investment intentions were made—over half of which were for Maharashtra—it is useful to put the figures in perspective and also keep in mind many were simply reiterations of investments already in the pipeline. Based on data from the DIPP, Business Standard has reported, proposed investment in the industrial sector fell from Rs 17.4 lakh crore in 2010 to Rs 5.7 lakh crore in 2012 and even this fell further to a mere Rs 3.1 lakh crore in 2015.
Within this, the actual investment was much lower—flat at around Rs 78,000 crore each year since 2013. It is true, of course, that the implementation rate was much higher for states like Gujarat and Maharashtra (32% and 43% respectively over the past three years) as compared to states like Odisha and Uttar Pradesh (6% and 18%, respectively)—the all-India average is just shy of 19% in the last three years. Though the DIPP figure is a fraction of the all-India investment across all sectors, the fall is in keeping with the overall fall in investment levels. As a proportion of GDP, gross fixed capital formation in the country fell from 27% in FY12 to a mere 23.3% in FY15.
Increased government capex is seen as the way out, both in FY16 as well as in FY17. While the increased government capex—both by the central and state governments as well as by PSUs—is welcome, it won’t cut much ice. With the size of the Union budget falling from 14.9% of GDP in FY12 to 13.1% in FY16, government capex has been static at 1.8%—if you include PSUs, the figure has risen from 7.3% in FY12 to 7.5% in FY15. Private capex, during this period, however, has fallen from 27% to 23.3%. In other words, it is a good idea to try and hike government—and PSU—capex, but it can’t make up for the shortfall in private capex. Unless the budget fires up the private sector, there’s a long haul ahead.