Denting tall success claims of the Make in India campaign, data released by the government show investment proposals in the industrial sector, in value terms, were at an 11-year low in 2015.
During the year, proposed investment in the industrial sector was Rs 3.11 lakh crore, down 23 per cent from Rs 4.05 lakh crore the previous year (2014). In 2010, it was Rs 17.36 lakh crore, according to data from the Department of Industrial Policy & Promotion (DIPP).
While the number of proposals inched up by eight per cent to 1,990 in 2015, from 1,843 the previous year, it was the second lowest in more than 10 years - suggesting lack of investor confidence among investors in taking up large, high-value projects.
The data pointed to a weak investment outlook and bleak domestic demand, sparking posers on the Bharatiya Janata Party-led government's efforts to push growth in industries, particularly in manufacturing. In 2015, the Reserve Bank of India cut interest rates by 125 basis points to 6.75 per cent, to revive domestic demand and investment.
Actual investments were down one per cent to Rs 77,972 crore in 2015, from Rs 78,747 crore the previous year.
In Gujarat, actual investments were down to Rs 5,991 crore, about a third of Rs 15,478 crore in 2014.
A senior DIPP official told Business Standard actual investments being more or less stagnant over the past two years could be attributed to persistent deflation.
At the Make in India Week in Mumbai last week, investment commitments worth Rs 15.2 lakh crore were secured, with host state Maharashtra alone accounting for Rs 8 lakh crore.
Domestic investments data, however, painted a contrasting - and glum - picture, even as the government is trying to increase the share of manufacturing to 25 per cent of gross domestic product by 2022. At present, it is 17 per cent.
Also, India is trying to break into the top 50 of the World Bank's Doing Business ranking - it is one of the key objectives of the Make in India initiative. At present, India's rank is 130.
He also said: "Over the last few months, we have seen increased public sector spending in the road and infrastructure sectors. This will, in turn, crowd in private sector investment, and also pull in domestic investment."
Banerjee added confidence had returned and numbers of the next six months would reflect that.
Gujarat accounted for the highest share of industrial investment proposals in value terms, up 20 per cent from last year's nine per cent. It got investment intentions worth Rs 64,733 crore in 2015.
Chhattisgarh, Maharashtra and Karnataka follow with shares of 11.7 per cent, 10.7 per cent and 10.1 per cent, respectively. Maharashtra got the highest number of proposals at 349. Proposed investments are based on the Industrial Entrepreneurs' Memorandum (IEM), filed by investors, and industrial licences and letters of intent issued by DIPP.
An IEM is an application for the acknowledgment of a unit outside the purview of the licensing provisions.
It has to be filed for an industrial undertaking, substantial expansion of the undertaking, manufacture a new article, or carrying on business of existing small-scale units after graduating into a large-scale sector.
Proposed investments translate into actual investments with a lag of six months to three years.
Electrical equipment made up for the majority of investment intentions, accounting for over 20 per cent of the proposals. Chemicals (except fertilisers) and the food processing sector had shares of 7.48 per cent and 5.36 per cent, respectively.
In an effort to enhance the ease of doing business, the government took various steps, including allowing single-step incorporation of companies through the INC-29 form and integration of 14 government services on an online single window portal called eBiz, for obtaining clearances from various government agencies.
Over the past 20 months since taking charge, the Prime Minister Narendra Modi-led government has taken measures of cutting down approval time and licensing conditions to facilitate investments in the manufacturing sector.
This, however, has resulted in a pick-up of foreign direct investment inflows, which rose 75 per cent in 2015 to $59 billion (Rs 3.83 lakh crore), according to the annual report of the United Nations Conference on Trade and Development.
The national accounts data released by the Central Statistics Office showed that gross fixed capital formation, a proxy for investment, grew just 2.7 per cent in the third quarter (October-December) of the current financial year, and 5.1 per cent in the April-December period, year-on-year.
The government is working with states to improve ease of doing business and cut red tape. In state rankings, compiled by the World Bank, Gujarat topped the list followed by Andhra Pradesh, Jharkhand, Chhattisgarh and Madhya Pradesh on the progress made on the 98 action points identified to unleash competitive good governance.