Business in Punjab Showing Positive Curve of Growth: Assocham

Showing a handsome revival in business sentiment in the last one year, as many as 248 projects involving an investment of Rs 1.20 lakh crore are under implementation in Punjab, with a considerable cut in the time taken for project completion, an ASSOCHAM paper has noted.

Most of the under implementation projects are in the services sector (other than financial) that constitute 45.1 percent of outstanding investment in 2017-18, followed by construction and real estate with 26.1 percent and manufacturing sector with 20.9 percent, said the study titled ‘Analysis of Punjab: Economy, Infrastructure and Investment,’ conducted by The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

“Investment plays a vital role in strong economic growth and benefits of investments could be transferred to the people. The state, under the leadership of Chief Minister Captain Amarinder Singh, is recording robust improvement in new investment," said ASSOCHAM Secretary General Mr D S Rawat.

Notably, Punjab is also witnessing considerable improvement in the time taken for implementation of the projects. The state has been witnessing a drop in the projects which remain under the implementation stage and reach the completion stage. This ratio used to be as high as 72.4 percent in 2010-11 and now it has been reduced to 58.5 percent, showing the number of projects which remain under the implementation stage reach a faster fruition.

In fact, the projects remaining under implementation or rather getting stuck has been a major concern for policymakers in most of the states. Most of the state governments along with the Centre have been trying to curb the project delays.

However, an analysis suggests that Punjab has been improving faster implementation of projects that have resulted in a decline in implementation rate of the investment projects.

Electricity sector has recorded 6.9 percent of outstanding investment projects which are in the stage of under implementation and irrigation has 0.9 percent. The state has recorded significant structural transformation in the economy from agriculture-driven economy to industry and services driven economy. But the state economy transformation has resulted in a significant increase in the service sector while industrial sector has recorded moderate increase to the state’s economic contribution.

Punjab’s new investment growth rate has recorded 488 percent increase in 2017-18 which is highest in the last eight years and higher than the all India average growth, noted the ASSOCHAM study.

According to the paper, the state has attracted Rs. 2.13 lakh crore outstanding investments in 2017-18,. The paper suggests that the state’s outstanding investment has recorded a sharp deceleration over the years and recorded contraction in 2013-14, 2014-15, 2015-16 and 2016-17. The state’s outstanding investment growth rate has declined from the peak level of 21.0 percent in 2010-11 to -5.2 percent in 2016-17, noted the ASSOCHAM paper.

In 2017-18, Punjab has outperformed India in terms of investment activities. Punjab’s outstanding investment has recorded a negative growth rate of 0.7 percent in 2013-14, 3.5 percent in 2014-15, 9.9 percent in 2015-16 and 5.2 percent in 2016-17 while India’s outstanding investment has recorded a positive growth rate of 0.7 percent in 2013-14, 5.0 percent in 2014-15, 3.8 percent in 2015-16 and 2.4 percent in 2016-17.

The sector-wise under implementation of investment projects suggests that most of the under implementation projects are in the services (other than financial) that constitute 45.1 percent of outstanding investment in 2017-18 followed by construction & real estate with 26.1 percent and manufacturing sector with 20.9 percent during the same period.

Electricity sector has recorded 6.9 percent of outstanding investment projects which are in the stage of under implementation and irrigation has 0.9 percent, noted the paper.

The analysis has observed that services and manufacturing have recorded a significant increase in their under implementation share in the state while electricity and constriction & real estate share has declined. The construction & real estate sector under implementation rate is highest in the state followed by Services (other than financial), irrigation, manufacturing and electricity in 2017-18.

The analysis suggests that current level of investment has recorded significant shift in the investment pattern as against the investment pattern in 2011-12. In 2011-12, Services (other than financial), electricity and construction & real estate sector were the top three priority sectors to invest in the state and these sectors constituted  93.5 percent of the total outstanding investment.

The state has recorded significant structural transformation in the economy from agriculture-driven economy to industry and services driven economy. The state economy transformation has resulted in a significant increase in the service sector while industrial sector has recorded moderate increase in the state’s economic contribution.

In terms of economic size, Punjab is the 14th biggest state in India and currently contributes around 2.65 percent of India economy, noted the paper. Punjab has been very crucial from the perspective of India’s food grain production. The state is the second largest contributor to India’s food grain. Therefore, better growth performance of state’s agriculture & allied sector can make the significant contribution to India’s agriculture & allied sector.

According to the latest statistics, the state has recorded an improvement in its foodgrains production during 2015-16 as compared to negative growth in 2014-15. In Punjab, food grain production has increased by 7.1 percent in 2015-16. Wheat and rice play a major role in food grain production in the state as wheat contributes 59.8 percent of total food grain production in the state and rice contributes 37.1 percent of total food grain production in 2015-16. Wheat has recorded 13.3 percent growth in 2015-16 while rice has recorded negative growth of 4.4 percent during the same period.

Industrialization is a key driver of the structural change in the economy as the state has witnessed a rising share of industry and services in the state economy as compared to the agriculture & allied sector.

The state’s industrial sector contributes 24.8 percent of state’s economy in 2016-17 which was 25.4 percent in 2011-12. The better industrial contribution to the state economy must translate in the generation of more employment opportunity. The workforce dependability on industrial sector indicates that currently the state’s industrial sector employability has increased from the level of 2001. According to the census 2011, workforce dependent on industry is 3.9 percent of the total workforce in the state which was 3.7 percent in 2001.

Currently, service sector plays a very important role in Punjab’s economy as its contribution to the state economy has been increasing over the years. The service sector has been the largest contributor of gross state domestic product and the sector contributes 49.4 percent of GSVA in 2016-17 which has increased from 43.8 percent of GSVA in 2011-12.