5 states bagged 57% of new investments in 2022-23; UP, Gujarat on top: RBI study

A study by the Reserve Bank of India (RBI) has revealed the skewed pattern of industrialisation in the country, with merely five states hogging more than half of the bank-assisted investment proposals made in 2022-23.

Uttar Pradesh, Gujarat, Odisha, Maharashtra, and Karnataka — in that order — accounted for 57.2 per cent (Rs 2,01,700 crore) in total project cost during 2022-23. Their combined share during 2021-22 was 43.2 per cent, says the central bank study.

In 2022-23, while UP accounted for the highest share of 16.2 per cent (Rs 43,180 crore), in project costs sanctioned by financial institutions, Gujarat came a close second with 14 per cent (Rs 37,317). Odisha came after that with an 11.8 per cent share, while Maharashtra (7.9 per cent) and Karnataka (7.3 per cent) followed right behind.

UP’s and Odisha’s shares in the total project cost improved significantly from 2021-22 and so did their average shares recorded between 2013-14 and 2020-21.

Kerala, Goa, and Assam were at the bottom of the pile in getting bank-assisted projects, with the lowest number of new investments. Kerala received a mere 0.9 per cent (Rs 2,399 crore) of investment plans; Assam got 0.7 per cent, and Goa 0.8 per cent. Haryana and West Bengal scored a dismal 1 per cent (around Rs 2,665 crore) as well.

87.7% surge

Investment plans, however, grew by 79.50 per cent despite a rise in bank interest rates, with the highest capital outlay of Rs 352,624 crore since 2014-15, says the study.

In all, 547 projects got the backing of financial institutions during 2022-23, with a record high of Rs 2,66,547 crore in project cost. In comparison, the respective figures during 2021-22 were 401 projects with a total project cost of Rs 1,41,976 crore. The surge is 87.7 per cent, says the RBI study.

“The envisaged total cost of the projects financed by banks and financial institutions reached a new peak during 2022-23 since 2014-15,” the study says.

Overall, 2022-23 recorded investment plans for 982 projects, while the corresponding figure for 2021-22 was 791 projects. Capital outlay rose from Rs 196,445 crore to Rs 352,624 crore, a surge of 79.50 per cent, the RBI study says. These included bank assistance, private funds, and overseas borrowings.

Interestingly, new investments increased even as the RBI hiked the repo rate by 250 basis points to 6.50 per cent since April 2022. Eight of these projects sanctioned by banks and financial institutions during 2022-23 were mega projects with a cost of Rs 5,000 crore or above, and 68 were large projects with a cost of Rs 1,000 crore to Rs 5,000 crore. These accounted for 27.1 per cent and 41.3 per cent of the total project costs, respectively.

Government gets credit

The central bank has credited the government’s capex plans for the pick-up in investments. “Investment activity gained further steam on the back of government capital expenditure, rising business optimism and revival in private capex in certain key sectors,” RBI Governor Shaktikanta Das said recently.

The RBI study said, “A sustained pick-up in bank credit in recent periods, rising capacity utilisation, improved business outlook and demand conditions and various government policy initiatives to support investment activities provided a conducive environment for the private corporates to undertake fresh capital all India investment.”

The study showed that investment in green field projects accounted for 93.1 per cent in the project costs financed by banks and financial institutions during 2022-23.

Sector-wise, the infrastructure sector accounted for 60 per cent in the total project costs during 2022-23, the report said. These comprise roads and bridges, power, telecom, ports and airports, storage and water management, special economic zones (SEZs), industrial, biotech and IT parks.