Challenging Punjab Deputy Chief Minister Sukhbir Badal’s tall claims regarding “successful results in investment scenario” after formation of Punjab Bureau of Investment Promotion (PBIP) in 2013 till date, a new study pointed out that the State registered a drop of over 63 per cent in attracting new investments during 2014-15.
The study conducted by the apex trade organisation, The Associated Chambers of Commerce of India (ASSOCHAM), indicated that Punjab failed to capitalise on its core benefits resulting in drop in attracting new investment.
“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 basis from over Rs7,200 crore in 2013-14 to just about Rs2,600 crore in 2014-15,” the study said.
Besides, it pointed that 75 percent of the projects remained non-starter during this period, pushing the projects’ cost up Rs41,000 crore.
Sukhbir, only recently, had claimed that the state had received “physical investment of Rs12,700 cores by giving clearance to 182 projects” since setting up of PBIP in 2013. He had maintained that these projects would generate total employment of 90,078 including 33167 direct and 56,911.
Sukhbir had claimed that maximum 42 per cent of investment came in food processing sector, followed by 27 per cent in manufacturing, 10 percent each in tourism and solar power, besides others. Maximum 36 projects have been cleared for Mohali, followed by 27 in ludhiana and 16 in Amritsar.
“Despite boasting of a robust infrastructure base, Punjab has failed to lure investors over the years as the new investments attracted by the State reached its peak level of Rs36,650 crore in 2007-08 which had declined to a meagre Rs2,600 crore in 2014-15,” said ASSOCHAM national secretary general DS Rawat.
Punjab had attracted total outstanding investments worth just over Rs2 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), Ferozepur-Sangrur (20 per cent) and other multi-regions (20 per cent).
The study stated that 302 projects, with investments worth over Rs1.6 lakh crore, that is 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 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 Rs41,900 crore — almost 45 per cent of their actual cost of over Rs93,390 crore, highlighted the study prepared by the ASSOCHAM Economic Research Bureau (AERB).
While 60 projects have reported time overrun ranging between one and 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).
Recording Punjab’s economic performance over the years, the study highlighted observed a sharp decelerating trend vis-à-vis growth performance of state’s economy as its overall economic growth had declined from over 10.2 per cent in 2006-07 to five per cent in 2014-15.
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 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 - 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 to nine per cent in 2013-14 but picked up slightly to reach 10 per cent in 2014-15.
The study suggested expansion of export related services to generate additional economic activity and more employment opportunities in the state as Punjab holds ample potential for growth and expansion of services sector.