India: New investments hit record low: CMIE

  • 2Q20 recorded 135 new investment proposals that envisaged an investment of INR561bn. This is the lowest count of new investment proposals in any quarter.
  • This is also the lowest new investments by value in 16 years. Adjusted for inflation, the value of new investments in the quarter is the lowest since CMIE started creating the series in 1996.
  • It is surprising that even half a trillion worth of new investments were proposed during the lockdown. Perhaps, half a trillion worth of new investments is the benchmark of what the nadir of new investments is.
  • A prolonged lockdown lasting across an entire quarter is perhaps the worst of all bad times. And so, the value of new investments observed during this quarter provides us with an idea or a benchmark of the value of such a nadir.
  • It is possible that the current estimate of new investment proposals in 2Q20 at INR560bn will get revised upwards in the coming quarters. But, it is unlikely to go up much because of the extraordinary quarter that this was.
  • It is usually expected that during times when economic activities come to a near halt, the government initiates counter-cyclical measures and offsets the decline in investment proposals. But, this was not the case – at least directly in 2Q20.
  • Projects by the government accounted for 42% of the new proposals and the private sector accounted for the remaining 58%.
  • Government projects usually account for about half of all new investment proposals. In the recent past its share has fallen and the latest quarter reflects this fall as well.

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