Thanks to A.K. Bhattacharya’s article in ‘Business Standard’, I decided to look for the statistics that he had presented. I wish he had given URL pointers, though. Some of the comments below his article are amusing. These are investment proposals that come to DIPP. Whether or not they are implemented and money is put to work is up to the entrepreneurs. Even the proposals themselves do present a sorry tale rather than a tale of investment revival.
Look at this statistics on intentions and implementation for the last two years and for the three months of the current calendar year:
|Inv. proposals (num)||Implemented|
|2016 up to March||534.0||122.0|
|Investment amounts (Rupees crores)|
|2016 up to March||60,130.0||42,219.0|
(2) So, what is proposed and what is actually implemented – there is a wide gulf. In fact, between 2007 and 2011 (five years), the proportion of investment proposals implemented is around 1%. Between 1992 and 2006, the proportion is 10%. Again, from 2012 onwards, the proportion jumps to around 14%, reaching 19% in 2014 and 25% in 2015. This makes us wonder about the reliability of statistics.
(3) However, if the numbers are correct, then we wonder how the overall capital formation in the country could amount to more than 30% of GDP. After all, the missing numbers are from foreign direct investment (FDI) and public investment in these calculations. Or, am I missing something?
(4) Further, regardless of the accuracy of the figures on implemented proposals, as A.K. Bhattacharya notes, even proposed investments have been dropping steadily since 2012. Between 2011 and 2012, there was a deep dive and it has been followed by steady decline every year in 2013, 2014 and in 2015. That is a bad sign. See table below under point (9).
(5) Let us come to the present. Of the Rupees 42, 219 crores of investment in the first three months of 2016 that are under implementation already, the stand-out state is Maharashtra with Rupees 34,648 crores of investment.
(6) Turns out that almost all of it is in Sugar! Now, we are all bleating away about how much of water does Sugarcane cultivation uses up and yet, 80% of the investment proposals under implementation in the country are in the sugar sector!
(7) There was a news-story in Indian Express (ht: ‘Swarajya’) published in April 2016 that no new sugar mills would be allowed in the drought-prone Marathwada region. Is it because they have all been sanctioned already? Is that what the table above indicates?
(8) Along with investment, the proposals likely come with an estimate of employment generation. Unfortunately, DIPP does not seem to track the actual employment generated vs. proposed employment.
(9) The table below shows the proposed employment and the number of proposals. Given that about 10% to 15% of the investment proposals are converted to actual investment, the same proportion might be at work in employment generation. Otherwise, the amount of formal employment in the country might be up sharply. Unfortunately, that is not the case.
|Proposed investment (INR bn).||Proposed employment generation||Number of proposals||Employees/proposal|
(10) In short, there is a lot of data in the DIPP-SIA (Secretariat for Industrial Approvals) that should be of use to policymakers. It appears worthwhile collecting this data and improving upon its reliability and collecting employment statistics as well. From a macro-perspective, assuming reasonable accuracy and reliability, these data do not bode well for the Indian macro story. Nor, if I may add, do they reassure us of the reliability of GDP growth statistics.