Central public sector enterprises (CPSEs) and departmental undertakings (DUs) have bucked the investment famine in the economy in 2016-17. According to official data reviewed by FE, these entities invested `2.54 lakh crore in projects worth `500 crore and above in the last financial year, achieving a creditable 96% of the annual target. Such large projects were to account for two-thirds of the targeted annual CPSE/DU capex in the year.
Investments by CPSEs and DUs from their internal and extra budgetary resources kept pace with the target when private companies’ capex remained muted and the Centre’s budgetary capital expenditure also slowed a bit in the final months of 2016-17. Robust CPSE/DU investments coupled with increased capital spending by state governments give credence to the Central Statistics Office’s estimate that gross fixed capital formation grew 3.5% in the third quarter of the last fiscal, after declining in the previous three quarters.
Among the government entities, the biggest investor was NHAI with a capex of over `53,800 crore, or 21% of the total investments by such entities in 2016-17. In April-February 2016-17, it built 2,350 km of highways, 33% more than in the year-ago period. NTPC came in second with `28,252 crore investments, followed by energy companies ONGC and PowerGrid (see chart). Delhi Metro Rail Corporation’s capex, though much less in size, was 366% of the target in 2016-17, as it expanded its network in the national Capital region. Of the 35 public-sector undertakings which reported capex above `500 a piece, 14 either met or exceeded the target and these include Indian Oil, Nalco, Hindustan Aeronautics, Sail, OVL, RINL, Numaligarh Refinery, MRPL, HPCL, GAIL, NPCIL and Tehri Hydro.
IOC, which is in the midst of a large capital investment programme to upgrade and expand its refining and petrochemical capacities, invested `14,972 crore in projects above the threshold against the target of `13,183 crore in 2016-17. A significant portion of this capex was to meet new emission standards. The largest oil marketer’s reported investments, however, also included the stake purchases in JSC Vankorneft and LLC Taas-Yuryakh oil fields from Russia’s national oil company Rosneft.
NTPC, which has about 24GW of capacity under construction, invested `28,252 crore, or 94% of its target of `30,000 crore. Oil retailer BPCL invested `9,354 crore, or 96% of its estimate, while Coal India undertook capital expenditure of `7,549 crore or 97% of its full-year target. Indian Renewable Energy Development Agency invested `6,770 crore against its target of `6,100 crore.
In 2015-16, the economy grew by 7.9% despite headwinds to growth, aided by a capex boost by the Centre. However, the Centre’s budgetary capex slowed a bit in 2016-17. In April-February of the year, its capex stood at `2.15 lakh crore (77% of full-year target) against `2.18 lakh crore (or 92% of the full-year target) in the year-ago period.
As reported by FE earlier, with surplus capacity in the economy at 25%, corporate balance sheets still over-leveraged, private corporate investments continued to be sluggish in 2016-17. While Reliance Industries spent most of the Rs 1.7 lakh crore it had planned to, the rest of the companies spent less than they had intended. Tata Steel, for instance, had till end December, spent less than 60% of the targeted capex of Rs 9,500 crore, the lowest outlay in several years.
In the second advance estimate released in March, the CSO kept the Gross Domestic Product (GDP) growth estimate for 2016-17 at 7.1%, the same as in the first advance estimate released in early January, and pegged the Gross Value Added (GVA) growth at 6.7%. Real GDP growth in the December quarter, in the midst of which the note ban came into effect, came in at a respectable 7% (though lower than 7.4% in the previous quarter) and the GVA at 6.6%, with the difference explained by robust indirect taxes and reining in of subsidies.