RBI Study on Investment Trends in India for FY 2022-23

• 22 Aug 2023

Source: IE

Why in News?

The Reserve Bank of India's (RBI) recent study sheds light on the state-wise distribution of capital investments in India during the fiscal year 2022-23.

• The study examines the geographical and sectoral trends that shape the landscape of project funding across the country.

What are the Highlights of the Study?

• Investment Surge and Capital Outlay:
  • Credit offtake soared by 19.7% in July 2023, amidst a 250 basis points hike in the repo rate by the RBI since April 2022, indicating robust investment momentum.
  • The aggregate capital outlay reached an impressive of over Rs 3.5 lakh crores, reflecting a significant increase compared to the previous years.
• State-wise Share in Total Project Costs:
  • Top Performers:
    • Uttar Pradesh emerges as the frontrunner, accounting for the highest share of 16.2% in the total cost of projects sanctioned by banks and financial institutions.
    • Following closely are Gujarat (14%), Odisha (11.8%), Maharashtra (7.9%), and Karnataka (7.3%), showcasing a dynamic distribution of investments.
  • Bottom Performers:
    • Kerala, Goa, and Assam secured the lowest shares, with Kerala receiving just 0.9% of the total investment plans.
    • Haryana and West Bengal also fell within the 1% bracket of the total investment projects.
• Sectors Driving Investments:
  • The infrastructure sector played a pivotal role, accounting for 60% of the total project cost in 2022-23.
  • Notably, road and bridge projects within the infrastructure sector garnered significant attention, benefiting from the "Bharatmala" initiative.
• Factors Influencing Investment Momentum:
  • Government capital expenditure, rising business optimism, and a revival of private capital expenditure in select sectors have fueled investment activity.
  • Despite the upward revision of the repo rate, credit offtake experienced robust growth, reflecting the confidence in investment opportunities.
• Outlook and Future Trends:
  • The RBI study provides a positive outlook for private investment, attributing the surge to increased government spending, improved business sentiments, and policy support.
  • Greenfield projects, constituting 93.1% of total project costs financed by banks and financial institutions, underscore the focus on new initiatives.
    • Greenfield project refers to investment in a manufacturing, office, or other physical company-related structure or group of structures in an area where no previous facilities exist.