New investments in India Inc projects up by 2.93% in Q1 FY24

New investments in projects by India Inc increased by 2.93% to INR 5.96 trillion in the first quarter of FY24, compared to INR 5.79 trillion in the same period of the previous fiscal year, according to a report by Bank of Baroda.

The rise in investments was primarily driven by the transport sector, which contributed approximately 74% to the overall investments, with airlines making the largest contribution within the segment. The power sector followed with a 10% share, while the chemicals, machinery, and auto sectors made notable contributions of 8%, 3%, and 2%, respectively.

In the first quarter of FY24, Indian corporates raised INR 2.33 trillion from bond markets, compared to INR 97,004 crore raised in the same period a year ago. Nearly 89% of the funds were mobilized from the financial sector, with asset financing companies accounting for 72%.

As a result, there were limited funds raised by non-finance companies. The construction and electricity sectors had shares of 4.1% and 2.4%, respectively, followed by diversified groups of companies with 2.3%.

The airline industry has been a dominant force over the past decade, with a share of 20-30%. However, investments in this industry are unique as they primarily involve the purchase of imported aeroplanes. While this adds to the country’s capital stock, it does not generate significant backward linkages with other sectors, thereby limiting the potential benefits for related industries. The report highlights that the boost primarily benefits global aircraft manufacturers.

However, the report claims that investment is yet to pick up in a broad-based manner, and in the short to medium-term, the responsibility of driving investments still rests with the government.

Source: Financial Express