Page 34 - CII-ARTHA

ARTHA

Net investment, measured as the annual addition to Net
Fixed Assets (NFA) and Capital Work in Progress
(CWIP), has followed a similar upward trajectory. In
FY25, net investment increased to Rs 7.1 lakh crore from
Rs 5.4 lakh crore in FY24, reflecting a growth of 31.3 per
cent. Between FY19 and FY25, net investment has
grown at a CAGR of 13.1 per cent, while in the INVESTMENTS
post-pandemic period the CAGR is 17.9 per cent. The
faster growth in net investment relative to gross
investment indicates that recent capital expenditure is
translating into net additions to productive capacity
rather than merely replacing depreciated assets.

It is important to note that reporting in the Prowess
database is not uniform, as not all firms report asset
data every year. Consequently, changes in aggregate
investment may partly reflect variation in the number of
reporting firms. At the same time, restricting the
analysis to a fixed set of firms could understate
investment dynamics, as the same companies cannot
be expected to undertake large capital expenditure
every year. To assess whether the observed increase
reflects genuine investment expansion rather than
reporting variation, the total change in assets has been
decomposed into contributions from a balanced panel
of firms and new entrants.

The analysis shows that while investment by newly pharmaceuticals, undertook rapid capacity expansion in
reporting firms fluctuates year-on-year, the balanced response to pandemic-related demand shifts. Firms
panel of over 1,200 companies has sustained also incurred capital expenditure to adapt to operational
investment momentum. Gross investment by this set changes, including health and safety protocols,
increased to Rs 8.2 lakh crore in FY25 from Rs 6.0 lakh workplace reconfiguration, and supply chain
crore in FY24. Between FY19 and FY25, gross adjustments. Lockdown-related disruptions may have
investment by the balanced panel grew at a CAGR of further delayed the disposal or rationalisation of assets,
6.2 per cent, while in the post-pandemic period, it has temporarily raising reported asset stocks.
grown by 15.4 per cent.

FY21 also records the widest gap between gross and
For FY25, asset data has been reported by around net investment, reflecting unusually high depreciation
2,600 companies so far, compared with approximately and impairment during the pandemic year. Widespread
4,700 companies in the previous two years. As capacity under-utilisation, financial stress in several
additional firms report their data, the aggregate sectors, and reassessment of asset values likely led to
investment figure for FY25 is likely to undergo upward higher write-offs and provisioning. The spike in FY21
revision. was followed by a decline in asset additions in FY22,
suggesting that the increase partly reflected temporary
factors rather than a sustained expansion in investment
One notable feature in Figure 1 is the sharp spike in
FY21, a year severely affected by the COVID-19 activity.
pandemic. This increase appears unusual relative to the
broader trend and is largely driven by firms newly In the post-pandemic period, investment trends appear
reporting in the gross investment series. to have normalised. Since FY23, both gross and net
Sector-specific developments during the pandemic investment have followed a more consistent upward
may also have contributed to higher asset additions. trajectory, with FY25 marking the strongest year in the
Some sectors, such as digital infrastructure and sample period.

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