Owing to the impact of general elections and uncertainty and delays in project commissioning, India witnessed a transient lull in investment activity in the first quarter of the current financial year (Q1FY25), according to Icra. Moreover, the capital expenditure by the Centre shrunk by more than 35 per cent year-on-year (YoY) in Q1FY25.
The YoY performance of seven of the 11 investment-related indicators moderated in Q1 FY25, relative to Q4 FY2024. Barring finished steel consumption, all indicators registered a single-digit growth during the period.
Sliding to the lowest level in the last two decades, the new project announcements dipped to Rs 1.1 trillion in Q1FY25 from a four-quarter high of Rs 12.6 trillion in the last quarter of FY24. Icra attributed the dip to the recently concluded general elections. The project completions also faced the brunt of the model code of conduct set in from March 2024.
According to Icra, the project completions in Q1 FY25 were at Rs 0.42 trillion, the lowest level since Q2FY2008. The dip was anticipated after project completions rose to an all-time high of Rs 3.9 trillion in Q4FY24.
As far as the capex is concerned, the capital expenditure by the Centre shrunk by 35 per cent in Q1FY25. Along with this, the capital outlay and net lending (NL) of 24 states also dipped by 12 per cent in 2M FY25.
Icra noted that a sharp expansion is needed to meet the capex target for the fiscal (Rs 11.1 trillion). However, due to uncertainty around the entire absorption of interest-free capex loan to the state government and the monsoon disruptions, Icra stated that achieving the targets for this fiscal is going to be an ambitious task.
Due to seasonality, the home sales volumes in the top seven cities dipped by 14.6 per cent quarter-on-quarter (QoQ) in Q1FY25. The new project notifications/introductions also contracted on a YoY basis over the same period. However, Icra expected the sales volumes to grow by 10 to 12 per cent in FY2025.
