Private firms still away from infra investments; only 5 industries absorb two-third capital

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Published: January 16, 2020 1:33:30 PM

The private sector needs to show more interest in infrastructure.

 

infrastructure, modi govt, gdp, nirmala sitharaman, slowdown, infra, infrastructure, investment, gross fixed assets, gfa. GFALow capacity utilisation amid demand crisis and a prolonged economic slowdown has also been one of the major reasons behind the falling investments.

Even as the government opened multiple ways for the private sector to grow, investment in the country is majorly dominated by the government sector. The situation gets worse with the trend as India lags in areas such as R&D, and high dependence on the government funds have kept private companies away from the global competition. Government spending big time, which has its implications given the fiscal constraints, can forge backward linkages with the investment made by other sectors like construction material and metals, said a Care Ratings report. It also said that the private sector needs to show more interest in infrastructure.

In the first half of the current fiscal year, the gross fixed capital fell to 28.8 per cent from 29.3 per cent in the last fiscal. Also, it is expected to further fall to 28.1 per cent by the end of FY20. An analysis of gross fixed assets of a sample of 3134 non-finance companies reveals that growth in GFA slowed down to 5.7 per cent in September 2019 compared with 8.3 per cent in September 2018, according to Care Ratings.

The highest investment in India goes to the crude oil and power industry. In fact, the top 5 industries account for almost over 65 per cent of the total GFA of the sample companies which is fairly well representative of the overall corporate sector. Telecom, Iron & Steel, and Automobiles & ancillaries are the other three industries in the top 5. These top five industries still continue to be the main drivers of capital stock and the sharp deceleration in the telecom sector has been responsible for the low growth performance.

Low capacity utilisation amid demand crisis and a prolonged economic slowdown has also been one of the major reasons behind the falling investments. To revive such investment, the report advises that the funding support needs to be steadier once such demand picks up and this will require the banking and NBFC segments to return to normal in the coming year.

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