How Q2 Slowdown Impacted Q3 Investments for Indian Companies: Key Insights and Trends

In the last quarter of 2024, private investment in India faced a downturn, dropping by 1.4%. This decline followed a brief recovery in the previous quarter, highlighting concerns over rising inflation and increasing costs.

On the flip side, government investment plans surged, boosting total investments in the economy by 9.9% to ₹11.46 lakh crore. State governments led this charge with a remarkable 34.6% increase in new investments, nearly three times the Union government’s 11.8% growth.

Foreign investment also saw a significant rise, jumping 44.2% to ₹1.02 lakh crore, primarily fueled by a single large steel project from Arcelor Mittal Nippon valued at ₹70,000 crore.

However, domestic investors displayed caution. Their new plans fell to around ₹6.11 lakh crore in the same quarter, and the total number of private sector projects decreased sharply from 1,253 in the previous quarter to just 1,061. The private sector’s share of new investment projects also decreased, dropping from 66.2% to 62.2%.

Shashikant Hegde, director and CEO of Projects Today, noted that the slowdown reflects worries about high input costs amid inflation and global uncertainty. He pointed out that disappointing corporate earnings and weak urban demand could also be affecting investor confidence, especially considering India’s GDP growth had slowed to 5.4% — its lowest in seven quarters.

Looking ahead, there’s hope for 2025-2026. Mr. Hegde is optimistic that easing inflation and government efforts to boost consumption will encourage private investment. He emphasized that continued government investment in key sectors will also be crucial.

In terms of state-level investments, new projects from State governments reached almost ₹2.28 lakh crore, surpassing the Union government’s ₹2.05 lakh crore. Mining, irrigation, pharmaceuticals, and sectors like construction and automobiles faced declines, while infrastructure investments only slightly rose by 0.8%. Notably, energy projects saw a significant increase of 21.9%, amounting to ₹4.5 lakh crore, representing nearly 40% of all new investments.

These investments are vital for ongoing economic growth, as they help improve the business climate and lower operational challenges.

In a surprising turn, Rajasthan emerged as the leader in new investment projects, with a nearly threefold increase compared to the previous quarter, reaching about ₹2.25 lakh crore. This shift pushed Maharashtra and Gujarat down to the second and third spots, respectively. Tamil Nadu, previously strong in investments, dropped out of the top ten, with its new projects falling sharply to just ₹18,066 crore — down 60.8% from the last quarter.

Haryana climbed into the top ten, boasting 80 projects valued at approximately ₹25,800 crore, replacing Jammu and Kashmir in the rankings.

The third quarter also saw a decline in mega projects, those worth at least ₹1,000 crore. Only 228 such projects were announced, totaling over ₹7.69 lakh crore, compared to 232 projects worth ₹8.4 lakh crore the previous quarter, indicating a continued drop in private investments.

Overall, while government support has provided a boost, the private sector’s cautious approach amid rising costs is a clear sign of the challenges ahead.

Published – January 19, 2025 09:41 pm IST