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Wednesday, July 22, 2015

New investments attracted by Punjab dropped 63% YoY: ASSOCHAM Study

75% projects remain non-starter; Projects' cost pushed by Rs 41K crore 

Punjab has failed to capitalise on its core benefits thereby leading to a dismal economic growth scenario considering that new investments attracted by the state registered a fall of over 63 per cent year-on-year (Y-o-Y) i.e. from over Rs 7,200 crore in 2013-14 to just about Rs 2,600 crore in 2014-15, noted a just-concluded study by apex industry body ASSOCHAM. 

“However, new investments attracted by states across India have increased by over 44 per cent Y-o-Y i.e. from about Rs six lakh crore in 2013-14 to over Rs 10 lakh crore in 2014-15,” pointed out the study titled ‘Impact of delay in investment implementation in Punjab,' conducted by The Associated Chambers of Commerce and Industry of India (ASSOCHAM). 

“Despite boasting of a robust infrastructure base, Punjab has failed to lure investors over the years evidently as the new investments attracted by the state reached its peak level of Rs 36,650 crore in 2007-08 which had declined to a meagre Rs 2,600 crore in 2014-15 thereby registering a fall of about 93 per cent,” said Mr D.S. Rawat, national secretary general of ASSOCHAM while releasing the the chamber's study. 

Punjab had attracted total outstanding investments worth just over Rs two lakh crore as of 2014-15, with services sector accounting for 39 per cent share followed by electricity (31 per cent), construction and real estate (23.5 per cent), manufacturing (six per cent) and irrigation (one per cent). 

Gurdaspur-Rupnagar is the most sought-after region for investors in Punjab as the region accounted for about 33 per cent of the total outstanding investments attracted by the state as of 2014-15 followed by Amritsar-Patiala (27 per cent), Firozpur-Sangrur (20 per cent) and other multi-regions (20 per cent). 

302 projects with investments worth over Rs 1.6 lakh crore i.e. 75 per cent of the total outstanding investments attracted by Punjab as of 2014-15 have remained non-starter with services sector accounting for 40 per cent share of these followed by construction and real estate sector (30 per cent), electricity (26 per cent), manufacturing (three per cent) and irrigation (one per cent). 

Out of the 302 projects that have remained non-starter, about 140 have either reported cost or time overruns. 

Poor execution of 52 investment projects has pushed up their costs by over Rs 41,900 crore i.e. almost 45 per cent of their actual cost of over Rs 93,390 crore, highlighted the study prepared by the ASSOCHAM Economic Research Bureau (AERB). 

While 60 projects have reported time overrun ranging between 1-157 months. 

Projects in non-financial services sector have garnered highest share of about 50 per cent in projects reporting cost escalation followed by electricity (39 per cent), construction and real estate (six per cent), manufacturing (three per cent) and irrigation (two per cent). 

While projects in construction and real estate sector have reported maximum cost escalation to the tune of 72 per cent of their actual cost followed by non-financial services (67 per cent), irrigation (64 per cent), manufacturing (42 per cent) and electricity (40 per cent). 

Ownership wise, private-sector owned projects have highest share of about 69 per cent in total projects that have reported cost escalation while state government-owned projects accounted for 28.5 per cent and Central government owned projects accounted for the remaining share. 

Private-sector owned projects have also reported highest cost escalation of 70 per cent followed by state government owned projects (35 per cent) and Central government owned projects (28 per cent). 

Punjab's economic performance over the years: 

A sharp decelerating trend has been observed vis-à-vis growth performance of Punjab's economy as the state's overall economic growth had declined from over 10.2 per cent in 2006-07 to five per cent in 2014-15, highlighted the ASSOCHAM study. 

Punjab's contribution to Indian economy has also declined from 3.3 per cent in 2004-05 to three per cent in 2013-14 and has remained at the same level during the course of past four years. 

Though, agriculture is mainstay of Punjab's economy, however its contribution in the state's gross state domestic product (GSDP) has declined significantly from the level of about 33 per cent in 2004-05 to just over 20 per cent in 2014-15 owing to factors like monoculture of wheat-paddy crop rotation, stagnation in yield of principal crops, declining farm incomes, rural indebtedness, natural resource constraint, degradation of soil health and falling groundwater table which has made the sector less remunerative. 

As such, ASSOCHAM study has suggested for greater focus on research and development, crop diversification and rural non-farm activities to restore the fast waning glory of agriculture sector. 

Even industrial sector has registered sharp decline in growth performance i.e. from peak level of 21 per cent in 2006-07 to just two per cent in 2014-15. 

Though services sector has been the largest contributor to Punjab's GSDP thereby accounting for about 53 per cent share but growth per year in this sector has also decelerated from its peak level of about 12 per cent in 2011-12 it had dropped to nine per cent in 2013-14 but picked up slightly to reach 10 per cent in 2014-15. 

Punjab holds ample potential for growth and expansion of services sector, as such policymakers should aim to expand export related services to generation additional economic activity and more employment opportunities in the state, suggested the ASSOCHAM study. 
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