RIL projects lift industrial investments to record high at Rs 17.9 trillion

The gloomy economic and investment climate may be the norm today, but industrial investment data paints a bright picture. Asia’s second richest man, Mukesh Ambani’s 18 big-ticket chemical projects in Gujarat accelerated industrial investments to a record high in 2019. 

Reliance Industries’ one and a half dozen chemical manufacturing projects in Vadodara in December contributed to a seven-fold increase in industrial projects in the country. This is in terms of value in 2019 year-on-year, data by the department for promotion of industry and internal trade (DPIIT) showed.

Industrial projects worth Rs 17.9 trillion were shown by DPIIT in 2019 as having been implemented, up from Rs 2.5 trillion in 2018, and Rs 71,396 crore in 2017, the data showed. 

This is in sharp contrast to the National Statistical Office’s (NSO) projection of a 0.6 per cent decline in the gross fixed capital formation (GFCF) in 2019-20. 

Experts pointed out that the DPIIT data is unlikely to reflect in the national accounts number in its entirety as it only captures balance sheet data. Some companies spread investments over several years or by carrying out trial productions for years. 

The number of projects that were shown as having commenced production stood at 1,229 in 2019 against 1,005 in 2018 and 571 in 2017.

At odds with the economic gloom and uncertainty, investment proposals or intentions also touched an 8-year high in 2019. Investment proposals worth Rs 6.79 trillion were recorded in 2019, up 46 per cent from 2018. 

Calender year 2010 had seen 4,336 investment intentions worth Rs 17.36 trillion, the highest ever. According to the second advance estimates of national accounts, gross fixed capital formation will decline for the first time in 18 years in 2019-20. It fell by 0.7 per cent in 2002-03. In fact, the share of investment in gross domestic product (GDP), at 27.1 per cent in 2019-20, is over a two-decade low with the share in 1998-99 lower at 25.5 per cent.

In DPIIT data, the chemicals sector contributed about 82 per cent to the industrial investments at Rs 14.7 trillion, suggesting that the jump was essentially on the back of the Reliance Industries’ projects. It commenced production of chemicals like low-intensity polyethylene, acrylic fibre, poly vinyl chloride and paraxylene.

Gujarat accounted for 84 per cent of total projects in value terms at Rs 15.1 trillion in 2019, against just Rs 31,819 crore in 2018.

“There is no discrepancy in the industrial investments data. It is absolutely correct. There has been a big jump in project implementation and investment intentions in December 2019,” a DPIIT official confirmed to Business Standard.

The data is a compilation of compulsory filing of industrial entrepreneur memorandums for production in industries that were de-licenced.

These industries include fuels, telecommunications, machine tools, fertilisers, drugs and pharmaceuticals, vegetable oil and food processing industry, among others.  

Former chief statistician Pronab Sen ruled out emergence of green shoots, looking at the DPIIT data. He said the data trend suggested that spike in project offtake in 2019 in the chemicals sector is essentially proposals dating back to 2008, 2009 or 2010, that are nearing completion now. Chemicals segment saw a five-fold increase in investment intentions in 2008 at Rs 1.5 trillion against Rs 32,749 crore in 2007. Chemicals accounted for 10 per cent of the proposed investment in 2008, against 3.9 per cent in 2007 and 2 per cent in 2009. 

“In all of these big projects, the completion is when you declare it as having come into full production,” said Sen. 

He added that in order to shore up balance sheets, companies sometimes show these as trial production, until they are ready to show production. 

He said the data will show in national accounts data, but in a staggered manner, as investments are in progress. 

“You won’t see a spike in investment. These are not green shoots. The investment is already taking place and demand-side effect has already happened in the past. Now that you have capitalised it, you only have the supply-side effect,” Sen, who is the country head of International Growth Centre (IGC), said.

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