Govt, private investments nosedive due to lockdown in H1 FY21; this sector takes maximum hit

The coronavirus pandemic has severely hit the investments in the first half of the current fiscal year 2020-21. The headwinds have majorly followed the government’s project, which fell by 81 per cent in FY21, according to a report by Care Ratings. Including the private sector, the overall new projects plunged 69 per cent to Rs 1.5 lakh crores in H1 this fiscal, compared with Rs 4.8 lakh crores in the same period last year, due to the nationwide lockdown, the report added. However, the fall in capital expenditure investments was expected as the firms faced the Covid-19 induced challenges and they focussed on survival.

While the new projects proposed by the government decreased from Rs 3.2 lakh crore in H1 FY20 to Rs 0.6 lakh crore in H1 FY21, investments proposed by the private sector fell from Rs 1.6 lakh crore to Rs 0.9 lakh crore during April-September 2020. The construction and real estate industry saw the maximum hit on investments that fell 95 per cent on-year from Rs 1.7 lakh crore to Rs 10,000 crore in H1 FY20. Hotels & tourism and transport services also witnessed a fall of 96 per cent and 88 per cent on-year respectively. 

However, on the brighter side, within the services industry, capex projects proposed in the IT services experienced a rise of 91 per cent from Rs 8,000 crore in H1 FY20 to Rs 14,000 crore in H1 FY21. It is to be noted that the investments announced for new projects have been falling for the past 5 years for the period April – September, with the exception of H1 FY19.

Meanwhile, in comparison with H1 FY20, Andhra Pradesh, Tamil Nadu, and Maharashtra continued to be in the top 5 states in terms of share of new investments announced in H1 FY21. Care Ratings further said that with the unlock guidelines and ease of restrictions in the domestic and global markets, it is expected that the businesses will take time to normalise operations, hence new capex projects may not be in the pipeline soon.