Is investment activity picking up in the economy?

06 January 2020

Investment activity is imperative for the growth of the economy as it has potential to generate output in multiples. The investment in the current fiscal has been subdued so far and a rebound in investment will necessary to enhance the pace of growth.

The following report is an update on the overall investment activity in the economy during the current fiscal. The report is divided into two parts and looks at the financing part of investment as well as proxy indicators of real activity:

1.) Flow of funds covering bank credit, corporate bonds, external commercial borrowings and foreign investments.

2.) Movement in key investment and industrial production indicators

 Flow of funds

The flow of funds reveals a mixed picture with fund flow from domestic sources being lower during the current fiscal while fund flow from foreign sources showing a significant pick-up.

Investment and production activity

  1. Project announcement by the government sector declined from Rs 81,740 crs during Q3-FY19 to Rs 62,808 crs during Q3-FY20
  2. On the other hand, project announcement by the private sector recorded a 60% jump from Rs 2.3 lakh crs during Q3-FY19 to Rs 3.7 lakh crs during Q3-FY20.
  3. Two new projects (one in the airline industry = Rs 2.3 lakh crs and one in the refineries industry = Rs 0.7 lakh crs) have driven the pick-up in private sector investment.
  1. The contraction in case of government project announcements have been 44% while in case of private sector announcements is 19%
  1. Capital goods have recorded contraction in the production in 10 consecutive months. The contraction has been more than 20% during each of the previous 3 months (Aug – October).


 Concluding Remarks



Madan Sabnavis, Chief Economist

Sushant Hede, Associate Economist


Rachna Gupta, Manager – Training


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