The long-drawn general elections, and the Assembly polls in the States of Odisha, Arunachal Pradesh and Andhra Pradesh, took a toll on fresh government capex in the first quarter (Q1) of this fiscal year, with new project investments slipping almost 70% to about ₹1.42 lakh crore from ₹ 4.69 lakh crore a year earlier.

Overall, 2,312 new projects worth ₹6.37 lakh crore were announced in Q1, a sharp 27.1% lower than the first quarter of 2023-24, when 2,833 new projects with a total investment commitment of almost ₹8.74 lakh crore were announced.

Spliced by sectors, manufacturing (-41.6%), infrastructure (-35.4%) and mining (-25.5%) recorded steep declines, while irrigation projects grew 37.7% over a small base, with investments worth ₹9,340 crore.

“Fresh investment announcements were severely hampered in the public sector by the elongated general and State election process,” said Shashikant Hegde, director and CEO, Projects Today, a firm that has been tracking new and ongoing investment projects in India since 2000.. “The decline would have been sharper, but for private sector investment commitments, which grew 22.5% with 1,696 new projects announced worth ₹4.95 lakh crore,” he added.

New projects from central government agencies fell a sharper 76%, with just 261 projects worth ₹ 47,061.33 crore announced between April and June, compared with 350 projects worth more than ₹2 lakh crore in the year-earlier quarter, Projects Today said in its latest survey on project investments. 

State government agencies announced 355 new projects worth ₹94,722 crore, compared with 1,203 projects worth ₹2,68,641 crore in Q1 FY24, indicating a decline of 64.7%.

With the new government in place at the Centre and States lining up new investment plans in their annual Budgets, Mr. Hegde expects a revival in government infrastructure investments in the coming months, with the full year likely to record a growth despite the lull in Q1.

“We also expect some of the super mega projects announced in the recent past, especially in the sunrise industries, to gain traction in this fiscal. Moreover, the private sector is seeking industry-friendly reforms in the Budget next week, and could step up their capacity expansion plans in the second half of the year,” he reckoned.

Among the States, Maharashtra remained on top of the new investment project charts, despite investment values more than halving from a year earlier to about ₹1.33 lakh crore. Just four of the top 10 States —Tamil Nadu (10th), Chhatisgarh (7th), Rajasthan (6th) and Haryana — reported growth in the value of new investment projects announced in Q1.

Karnataka and Gujarat slipped from the second and third positions, respectively, a year ago, to the eighth and fifth ranks in Q1, with just about ₹72,000 crore of investments between them. Haryana emerged as the State with the second highest investments, followed by Uttar Pradesh and Odisha.