Odisha has edged past Maharashtra as the most attractive destination for investments during H1 or the April-September period of FY20. Cornering 18 per cent of the virgin investments drawn by all states, Odisha won hands down, surging past Maharashtra, which mopped up 16 per cent.
In FY19, Maharashtra had aced other states, grabbing 21 per cent share of the new investments. By contrast, Odisha which had a mere four per cent share last fiscal, drastically improved its tally to 18 per cent in the April-September period of this financial year, data from the Centre for Monitoring Indian Economy (CMIE) showed. Gujarat was another major gainer, scaling up its share in total new investments from two per cent to nine per cent in the period under review. Gujarat’s share in the new investments had deteriorated from nine per cent in FY17 to two per cent in FY19. However, during the first six months of the current fiscal year, it regained its share in the new investments to nine per cent in H1 FY20.
The percentage share of eight states in new investments plunged in During H1 of FY20. These were: Telangana, Bihar, Madhya Pradesh, Andhra Pradesh, Tamil Nadu, Punjab, Haryana and Maharashtra. Seven other states gained in share: Odisha, Gujarat, Rajasthan, West Bengal, Uttar Pradesh, Delhi and Andaman & Nicobar.
During H1 FY20, new investments contracted by 83 per cent as against a 15 per cent growth logged in the corresponding period last year. Transport services had the highest share of 77 per cent in the services sector in FY19, an analysis by CARE Ratings noted. Construction and real estate, where investments shrank in FY19, witnessed their share contracting 49 per cent in H1 FY20.
New investment projects in FY19 were the lowest in the past five years. The scenario deteriorated in H1 of FY20 as fresh investments slumped to a 15-year low. The private sector committed more investment projects in the period than the government. The manufacturing sector drove new investments, whereas services and electricity sectors witnessed a decline.
“There has been a sustained decline in the new projects undertaken in the past five years. Investments in new projects amounted to Rs 11.9 trillion, the lowest in the past five years. New investments contracted for the fourth consecutive year by 10 per cent in FY19, lower than the 22 per cent contraction in the previous year. During H1 FY20, the aggregate new investments were the lowest in the corresponding period over the past 15 years at Rs 1.9 trillion,” the report by CARE Ratings said.
The overall investment climate is emblematic of a slowdown aligning with the relatively slow growth in consumption and surplus capacity of the industry in general. Funding continues to remain a key challenge to be negotiated unless the stress in banking and NBFC (non-banking financial services) is mitigated. A confluence of growth in new projects and reduction in stalled projects is needed to improve the investment climate, the report noted.