Announcements of new investment projects, by the private corporate sector, increased significantly during 2021-22, with the total cost of projects increasing by about 90% over 2020-21, yet staying below the pre-pandemic levels, the Reserve Bank of India’s monthly bulletin noted.
Overall, the investment plans of 791 projects were made during 2021-22 aggregating to Rs 1,94,548 crore as against 576 projects in 2020-21 with investment intentions of Rs 1,16,603 crore, which was lower than the levels seen since 2016-17.
Looking ahead, stronger balance sheets, rising capacity utilisation, robust demand sentiments, higher capital spending and various policy initiatives by the government are expected to revive the capex cycle, an article in the bulletin stated. Of the total capex investment envisaged during 2021-22, more than one-third is expected to be spent in 2022-23, as business activities resume and demand conditions improve.
State-wise data reveals that during 2021-22, more than half (56.4%) of the projects were taken up in five states — Rajasthan, Uttar Pradesh, Gujarat, Maharashtra and Tamil Nadu. The share of these five states increased significantly from an average share of 40.7% during 2012-13 to 2019-20 to more than 50.0% during the last two years.
The total cost of infrastructure projects increased from Rs 56,103 crore in 2020-21 to Rs 81,221 crore in 2021-22. The number and share of mega projects (Rs 5,000 crore & above) in the total project cost recorded a noticeable decrease during 2020-21 and 2021-22. The large projects (project cost: Rs 1,000 crore – Rs 5,000 crore) contributed a significantly higher share (47%) in project cost sanctioned during 2021-22. Though the number of large projects increased to 36 during 2021-22 from 24 projects during the previous year, their share in the total cost of projects moderated during 2021-22.
While the infra sector — power, telecom, ports etc – remained the major sector accounting for more than half of the total project cost during 2021-22, its share in the total project cost has declined from 74.3% in 2020-21 to 56.7% in 2021-22, despite an increase in the number of projects during the same period.
The fall in the share of infrastructure projects was mainly driven by the declining share of the power sector, even though it retained its top position in the project sanctioned by banks or foreign investors. The study covers only those projects where private ownership is above 51%.