Bank finance for projects: Gujarat and Maharashtra in an investment league of their own

Synopsis

Gujarat has remained the top state in attracting investments as it got the most number for projects in each year between FY15 and FY25, while Maharashtra has retained the second place for the last four fiscal years, showed data available in a study by the Reserve Bank of India (RBI) staff.

MUMBAI: Western India led other parts of the country in drawing bank financing into capacity-enhancing projects over at least the past four years, the latest central bank data showed, although the slow pace of credit growth nationally pointed to circumspect investment by the private sector.

Gujarat has remained the top state in attracting investments as it got the most number for projects in each year between FY15 and FY25, while Maharashtra has retained the second place for the last four fiscal years, showed data available in a study by the Reserve Bank of India (RBI) staff.

"The regional factors, for instance, accessibility of raw materials, availability of suppliers, availability of skilled labour, presence of adequate infrastructure, size of the market, growth potential, and demand conditions remained crucial in destination choice for the investment," said the article published in the August bulletin of the RBI. The article also said that a fall in the total cost of projects sanctioned by lenders points to tepid investment optimism among private corporates.

"Lower investment announcements amid uncertain demand conditions, along with a higher cash buffer, points to a cautiously optimistic outlook for private investment activity," said the authors in the report. The views expressed in article, authored by RBI staff, do not necessarily represent RBI's views. The pipeline of projects, financed through all channels, shows capex is expected to rise to Rs 2.7 lakh crore in 2025-26.

This is expected to be aided by robust macro fundamentals, improved balance sheets, rising capacity utilisation, easy liquidity conditions, infrastructure push, and a one-percentage-point policy rate cut so far this year, said the report.

In FY25, 907 projects got assistance from banks and financial institutions with a total cost of projects of Rs 3.7 lakh crore. Of this, Gujarat secured highest number of projects at 152 followed by Maharashtra and Uttar Pradesh at 111 and 78. These 3 states along with Andhra Pradesh and Rajasthan accounted for about 60% in total cost of the projects.

...moreless

...moreless