New investment announcements at 20-year low in Q1FY25: BoB report

Amidst the expectation of a pick-up in private investments thanks to sustained economic momentum, a new report has estimated that investment announcements by India Inc for the first quarter of the year were at a 20-year low of Rs 44,300 crore.
 
The report by Bank of Baroda based on data from the Centre for Monitoring Indian Economy (CMIE) notes that the previous low was in June 2005.
 
“Given the fact that the economy has been growing at a steady pace, the only reason that can be attributed to the sluggish intentions can be the Elections,” it said, adding that industry has been probably in a wait and watch mode before taking any investment decision.
 
It, however, pointed out that this has not been the trend in the past when Elections were held. For instance, in the first quarter of the fiscal 2014-15 there were investment announcements of Rs 2.9 lakh crore and in the first quarter of the fiscal 2019-20 it was Rs 2.1 lakh crore.

“Hence, while June does tend to have lower investment announcements as they normally peak in March which is the yearend, it has been exceptionally low this year,” the report noted.
 
The exhaustion of plans in the preceding March quarter where a high of Rs 12.35 lakh crore was announced, which was lower to only that of March 2023 when it was 16.20 lakh crore could be another reason for this slowdown.

According to the data, manufacturing has been the dominant sector in the total intentions listed here with share of 46.4% in the first quarter of the current fiscal followed almost evenly by electricity with a 23.5% share and non-financial services with a 22.2% share. Construction and real estate had a 7.9% share in new investment announcements in the first quarter of the fiscal.
 
The report noted that it would need to be seen whether there is any major pick-up in the second quarter considering that the Union Budget 2024-25 will be announced on July 23. “A good monsoon and steady demand during the festival season which starts from end-August and lasts till December would be the time when investment could increase at a faster pace,” it said.