Corporate investments down for 2nd successive quarter in 1QFY24

New Delhi: Private investments, including public sector enterprises (PSEs), grew only 2.6 per cent YoY in 1QFY24, marking the slowest growth in 11 quarters, as per a report by Motilal Oswal Financial Services.

The government sector accounted for 16.6 per cent of total investments in 1QFY24, up from 12 per cent in 1Q of the past three years and 10 per cent in the past decade.

Corporate investments (including PSEs) declined for the second consecutive quarter in 1QFY24. Following a contraction of 0.5 per cent YoY in 4QFY23, corporate investments likely fell 6.2 per cent YoY in 1QFY24. The share of corporate sector, thus, fell to 41.2 per cent of total investments, lower than 50 per cent in the pre-Covid period, the report said.

Overall, a strong residential property market holds the potential to boost economic activity, and the government’s focus on infrastructure is commendable. However, weak income growth, high interest rates, fiscal consolidation, and high economic uncertainties create vulnerabilities about the durability of the household investments.

Using data on stamp duty and registration fees collected by states, cement production and steel consumption, our estimates suggest that household investments (primarily including residential real estate) surged 13 per cent YoY in 1QFY24, following an average growth of 12 per cent YoY in the past four years. If so, the share of household sector was steady at 42 per cent of total investments in the quarter, similar to what it was a decade ago in the early 2010s decade, the report said.