Private Corporate Investment: Performance and Near-term Outlook

August 18, 2023

According to a study by RBI staff, Uttar Pradesh (UP) has emerged as the top state in attracting investment funds from banks and financial institutions, surpassing Maharashtra. UP accounted for the highest share (16.2%) in the total cost of projects sanctioned during 2022-23, with Gujarat, Odisha, Maharashtra, and Karnataka following suit.

Private corporate capital investments, based on projects sanctioned by financial institutions, increased for the second consecutive year after a period of stagnation. The total cost of projects sanctioned during 2022-23 reached a record high of Rs 2,66,547 crore, marking a 6.7% increase from the previous year. The study underscores the Government’s focus on capital expenditure and policy initiatives to stimulate investment.

What does the study reveal about Uttar Pradesh’s performance in attracting investment funds?

The RBI study highlights Uttar Pradesh’s dominance in attracting investment funds, with the state accounting for the highest share (16.2%) of the total project sanctions in 2022-23. This positions UP ahead of Maharashtra and other states.

How has private corporate capital investment changed over the years?

After a subdued period in 2019-20 and 2020-21, private corporate capital investments based on sanctioned projects rebounded in 2022-23 for the second consecutive year. This rebound is attributed to the Government’s emphasis on capital expenditure and economic revival measures.

Which sectors are attracting the highest capital expenditure?

Infrastructure remains the key sector attracting significant capital expenditure, particularly in Roads & Bridges and Power. The sustained bank credit growth, improved business outlook, and government policies have contributed to this trend.

What factors contributed to the increase in investment activities?

The study points out that the Government’s emphasis on capital expenditure, coupled with policy initiatives to revive the investment cycle, created a conducive environment for private corporations to undertake fresh capital investments.

How did the investment landscape change for Maharashtra and Odisha?

While Uttar Pradesh’s share of investment funds increased significantly, Maharashtra’s share decreased from 19.7% to 7.9% between 2013-14 and 2022-23. On the other hand, Odisha’s share improved to 11.8% from the previous year’s 2.2%.

What are the potential implications of Uttar Pradesh’s growing dominance in attracting investment funds?

Uttar Pradesh’s emergence as a key investment destination could contribute to the state’s economic growth, create employment opportunities, and stimulate overall development. However, challenges such as infrastructure development and effective utilization of funds need to be addressed for sustainable growth.

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