Unpaid loans per establishment even rise faster in Andhra and Punjab compared with the rest of the nation.
Rising Fixed Assets in Informal Units
In 2022-23, informal sector units in India experienced significant growth in capital formation, particularly in Andhra Pradesh and Punjab, according to a Moneycontrol analysis of survey data released by the government on July 5.
On average, fixed assets owned by establishments across the country increased by 13 percent, while Andhra Pradesh and Punjab saw a remarkable 40 percent rise.
Defining Informal Units
Informal units are typically proprietorships or partnerships not registered under the Companies Act. The latest data is expected to play a crucial role in the government’s calculations for the new GDP series.
State-wise Performance
Among the 19 major states considered, eight saw their assets grow by over 20 percent. However, four states—Kerala, Delhi, Odisha, and Rajasthan—witnessed a decline in asset value per establishment.
Net Addition to Fixed Assets
The net addition to fixed assets more than doubled to Rs 12,349 per establishment in the last 365 days, compared to Rs 5,266 during the previous period.
Andhra Pradesh and Punjab led the charge, with increases tenfold and nearly eightfold, respectively. In contrast, Bihar experienced a 50 percent drop in net additions.
Loan Book Expansion
Informal entities in Andhra Pradesh and Punjab also saw their loan books expand faster than the national average. Outstanding loans per establishment rose by 53.8 percent in Andhra Pradesh and 234.6 percent in Punjab, compared to a 34 percent increase nationally.
Comparison with Private Corporations
When compared with private non-financial corporations, the growth in fixed assets for informal units was lower. In FY23, gross capital formation on machinery and equipment for private non-financial corporations increased by 18.2 percent.
Challenges in Punjab and Haryana
Despite the growth, enterprises in Punjab and Haryana faced challenges with their interest burden per enterprise more than doubling during this period.
Government Efforts to Spur Capex Spending
The government has been encouraging capital expenditure by the private sector through increased investments in infrastructure. Capital spending rose by nearly 30 percent in FY24, up from 24.8 percent in FY23.
