Capex Trends in India: Slower Pace of Investment in Q3
The construction and real estate sectors are facing a significant decline in new project announcements, while manufacturing and other sectors show mixed performance.
CapexInvestmentReal EstateManufacturingEconomyReal EstateJan 01, 2025
While the September quarter showed some recovery in the value of new investments, the December quarter reverted to a sluggish trend.
According to data from the Centre for Monitoring Indian Economy (CMIE), new projects worth ₹6 trillion were announced during the December quarter, a decline of nearly 22% year-on-year and 16% sequentially.
This downtrend was observed in both government and private sectors, with the government experiencing a sharper decline in momentum.
The data on capital investments is provisional and subject to revision.
Notably, the June quarter also experienced a dip, attributed to election-related disruptions.
Anitha Rangan, economist at Equirus, commented, 'Capex will be patchy, unless there is a strong resolve from the government.
With December already gone by, where we have not seen much, the ask is tall.'
In the first nine months of 2024-25, new projects worth ₹15.6 trillion have been announced, down 27% from the same period in the previous fiscal year.
However, these figures should be read carefully due to potential base effects.
Madan Sabnavis, chief economist at Bank of Baroda, noted that FY24 data could be skewed due to large announcements of aircraft purchases in the transport sector.
The investment slowdown in the December quarter had varied impacts across key sectors.
Manufacturing, a cornerstone of India’s capital investments, showed mixed performance.
While new investments in the sector rose 19% year-on-year to ₹3.3 trillion, they fell from the previous quarter’s ₹3.8 trillion, signaling a loss of momentum.
The construction and real estate sectors were the hardest hit, with new project announcements plummeting by 65% year-on-year to ₹21,351 crore, down from ₹71,741 crore in the previous quarter and ₹60,955 crore in the same period last year.
In contrast, the electricity and non-financial services sectors showed relative resilience.
Both sectors registered a year-on-year decline in investment proposals, but their quarter-over-quarter levels remained steady, reflecting sustained capital commitments.
The December quarter marked a notable shift in sectoral focus.
While green energy projects dominated new investments in the April-September period, the December quarter saw only one renewable energy project announcement, valued at ₹36,700 crore.
The steel and chemical sectors took centre stage, driving three of the five largest investments of the quarter, collectively worth ₹2 trillion.
Notably, Nippon Steel's two-phase project in Andhra Pradesh’s Nakkapalli stood out, with the first phase valued at ₹55,964 crore and the second at ₹80,000 crore.
A Raigarh-based data centre project valued at ₹30,000 crore was also among the largest investments announced.
Collectively, the top five projects accounted for nearly 44% of the total project pipeline in Q3.
Project completion rates also saw a sharp decline in the December quarter, with the value of completed projects dropping to ₹91,952 crore—a steep 52% fall from ₹1.9 trillion in the same period last year.
This marks only the second time since September 2021 that quarterly project completions have fallen below ₹1 trillion.
The first such dip occurred in the June quarter of 2024, due to national elections disrupting project progress.
The Mazagon guided missile destroyers project in Mumbai, valued at ₹29,644 crore, was the largest completed project of the quarter, contributing over one-fifth of the total project completions during this period.
The coming quarters will be crucial in determining whether this investment slowdown is temporary or indicative of deeper structural challenges in India's capital formation landscape.
As Rangan emphasized, 'Capex is necessary to drive growth, otherwise a slower demand will result in lower fiscal collections and become a circular problem for fiscal consolidation.'
Frequently Asked Questions
What is the current trend in capital investments in India?
The trend in capital investments in India has shown a mixed performance. While the September quarter saw some recovery, the December quarter reverted to a sluggish trend, with new projects worth ₹6 trillion being announced, a decline of nearly 22% year-on-year and 16% sequentially.
Which sectors have been the hardest hit by the investment slowdown?
The construction and real estate sectors have been the hardest hit, with new project announcements plummeting by 65% year-on-year to ₹21,351 crore, down from ₹71,741 crore in the previous quarter and ₹60,955 crore in the same period last year.
What sectors showed relative resilience in the December quarter?
The electricity and non-financial services sectors showed relative resilience. Both sectors registered a year-on-year decline in investment proposals, but their quarter-over-quarter levels remained steady, reflecting sustained capital commitments.
What is the significance of the top five projects in the December quarter?
The top five projects accounted for nearly 44% of the total project pipeline in Q3. Notable among these is Nippon Steel's two-phase project in Andhra Pradesh’s Nakkapalli, with the first phase valued at ₹55,964 crore and the second at ₹80,000 crore, and a Raigarh-based data centre project valued at ₹30,000 crore.
What are the implications of this investment slowdown for the Indian economy?
The investment slowdown has significant implications for the Indian economy. It could lead to a slower demand, resulting in lower fiscal collections and posing a challenge for fiscal consolidation. The coming quarters will be crucial in determining whether this slowdown is temporary or indicative of deeper structural issues.
Related News Articles
Mumbai Malls in Trouble: 17 Get Notified for Fire Safety Norm Deficiencies
The Mumbai Fire Brigade has issued notices to 17 malls in the city for failing to meet fire safety norms.
Nadir Godrej Family Acquires Luxury Apartments in Mumbai's Malabar Hill for Rs 180 Cr
Godrej Industries' Chairman Nadir Godrej and his family have acquired three sea-view luxury apartments in Mumbai's Malabar Hill for a total of nearly Rs 180 crore.
Mumbai's Property Market Sees 13.2% Growth in Registrations During Navratri
Mr. Prashant Sharma, President of NAREDCO Maharashtra, attributes the significant growth in property registrations during Navratri to the resilience of Mumbai's real estate sector and the increasing confidence of buyers.
Indian Businessman Shreegopal Kabra Acquires Two Luxury Sea-Facing Apartments for Rs 198 Crore in Mumbai
In a significant move in Mumbai's real estate market, Shreegopal Kabra, the chairman of RR Kabel Ltd, and his family have spent a whopping Rs 198 crore on two premium sea-facing apartments. This acquisition highlights the ongoing interest of high-net-wort
Agarwal Holdings Secures Prime Land in Juhu from Shapoorji Pallonji for Rs 455 Crore
Agarwal Holdings, a prominent real estate and financial services company, has made a significant move in the Mumbai real estate market by acquiring a prime piece of land in Juhu from Shapoorji Pallonji Group for Rs 455 crore. This acquisition marks a stra
Runwal Realty Partners with Sonam Kapoor as Brand Ambassador
With a robust 45-year legacy, Runwal Realty, a prominent player in the real estate market, has onboarded Bollywood actress Sonam Kapoor as their brand ambassador. This strategic move underscores the company's commitment to excellence and innovation in the residential, commercial, and retail sectors of Mumbai.