The recent quarterly survey by Projects Today, an independent firm that monitors investment projects in India, has revealed that fresh investment announcements have dipped to a five-year low in the first financial quarter of 2020-21. Despite the slump, largely attributed to extended pandemic-induced lockdowns, the survey identified Tamil Nadu as the country’s highest investment destination.
Investment Patterns in the First Quarter
Amidst the low investment scene, there was a sign of gradual improvement every passing month in the quarter spanning from April to June. April witnessed an announcement of 260 new projects valued at Rs. 20,181.6 crore. This figure climbed in May to cover 436 new projects with a worth of Rs. 37,922 crore. With the advent of Unlocking 1.0 of the economy in June, there was a surge in new project announcements, reaching 545 new efforts with a total value of Rs. 39,755.43 crore.
Key Players and Government Expenditure
Reliance Industries secured investments from global giants such as Google, Facebook, and Intel. However, fresh project expenditure from Central government agencies saw a decline in June 2020, even though it is anticipated to increase in the upcoming months. The government has currently ceased the initiation of approved new schemes due to a revenue shortfall resulting from the lockdown and rising expenses related to the pandemic.
Fiscal Reforms and Future Predictions
The impending quarters will determine the effectiveness of the Centre’s stimulus packages, which include fiscal and financial reforms determined to attract foreign and private domestic capital. The majority of the investment projects were announced by the government sector and private promoters. There is also an expectation for fresh capacity additions in the healthcare and pharmaceutical sectors due to Covid-19.
Impact of the Pandemic on Investments
The Covid-19 pandemic has influenced companies to undertake intensive research for vaccinations, requiring funding. Additionally, there has been increased production of Personal Protective Equipment (PPEs), masks, sanitizers, and other personal hygiene products. The development of various antiviral and immunity-boosting medicines also saw an incline.
State Initiatives
States such as Tamil Nadu, Maharashtra, Uttar Pradesh, Karnataka, and Madhya Pradesh have held investor meets, signed MoUs, reworked labor laws, built land banks, and sent proposals to foreign companies to attract investments. Despite these initiatives, factors such as slow bureaucratic processes, antiquated land, and labor laws have deterred foreign companies from investing their technology and capital in India.
The Position of Tamil Nadu
Tamil Nadu accounted for 18.63% of the Rs. 97,859 crore worth of investments planned to execute 1,241 projects in India during the first quarter. The state is also set to host three of the five data centres scheduled to come up in the country at Rs. 7,400 crore. The remaining two centres are proposed in Maharashtra, which followed Tamil Nadu with fresh investments totaling Rs. 11,228.8 crore.
The Path Forward
The abundance of labor force in India provides the potential to become a global contract manufacturer in areas like automobile ancillaries, smartphones, electronic items, capital goods, food processing, pharmaceuticals, chemicals, etc. However, it is imperative that all concerns preventing this potential be addressed promptly at the central and state levels.