Private sector manufacturers in India raised their fresh investment announcements in FY22 by more than three-fold over the last year to Rs 8.08 lakh crore, according to Goldman Sachs.
"The growth was contributed by both traditional sectors like petrochemicals, steel, cement and automobiles, and new-age sectors like electronics, e-vehicles, data centers," Goldman said in a report.
Compared to FY20, the tail-end of which was hit by the coronavirus pandemic, the increase in new capital expenditure announcements made in FY22 by private manufacturers was an even higher 460 percent.
On the whole, fresh private sector capex announcements in FY22 amounted to Rs 11.10 lakh crore, up 128 percent from FY20. The rise over FY21 was in the 145-150 percent range given that fresh private sector capex announcements fell in FY21 when compared to FY20.
FY21 was the year hit worst by the pandemic, with India's GDP contracting 6.6 percent as the economy entered a short-lived technical recession.
The sharp increase in capex announcements seem to corroborate national accounts data, with gross fixed capital formation (GFCF) – a proxy for investments – estimated to have risen 14.6 percent in FY22. In FY21, GFCF had contracted 10.4 percent year-on-year.
From FY13 to FY20, GFCF had grown by 5.6 percent on average every year.
The up-turn in private investment, at least going by the fresh project announcements, will be music to policymakers' ears.
The government has looked to spark the private sector investment cycle into action, with the Reserve Bank of India (RBI) noting earlier this month in its monthly State of the Economy article that "spurring private investment remains a key thrust area for sustaining growth on a durable basis".
The Centre's capex in the first 11 months of FY22 was Rs 4.85 lakh crore as against the revised target of Rs 6.02 lakh crore for the full year. Data for the full year will be released at the end of May.For FY23, the central government has set an even more stiff capex target of Rs 7.50 lakh crore, although this includes Rs 1 lakh crore as an interest-free 50-year loan to states to meet their capex requirements.