India’s investment landscape favors transport, power, and chemicals sectors

Recent reports from the Bank of Baroda have shed light on the concentrated nature of investment activity in India, with a significant emphasis on the transport, power, and chemicals sectors. This trend is reflected in the fact that 83% of investment intentions announced this year were within these sectors, and notably, the transport sector alone represented 57% of these announcements.

Despite the overall aggregate credit growth reaching 20% as of September, the expansion of bank credit to large industries was relatively modest at 6.1% year-over-year. Meanwhile, finance companies have played a pivotal role in fundraising activities, accounting for 84% of the Rs 4.12 lakh crore raised in the first seven months of the year.

A closer look at company balance sheets from March 2023 reveals a cautious growth in fixed assets at 3.6% over March for a sample of 1,420 companies. By September 2023, this figure had grown to a year-on-year increase of 7.9%. In the wake of the Covid-induced lockdowns, certain sectors such as infrastructure, media, and retailing saw an uptick in their fixed assets. On the flip side, industries like FMCG, hospitality, paper, electricals, non-ferrous metals, and logistics experienced growth below the average.

The post-lockdown period also witnessed varying performances across different sectors. While consumer durables reported higher than average growth rates despite a decline from 2022 due to diminishing pent-up demand, the diamonds and jewelry sector surged ahead by September 2023 thanks to robust demand conditions. Conversely, power, automobiles, auto-ancillaries banking, telecom, IT, healthcare, textiles, realty, plastic products, and trading observed slower growth in fixed assets compared to other sectors.

This analysis underscores the uneven recovery and investment patterns across India’s diverse industry landscape as it continues to navigate post-pandemic economic conditions.

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