Bangalore: The Reserve Bank has said growth deceleration that began in the past fiscal when GDP growth had slipped to a nine-year low of 6.5 percent and continuing in this fiscal, has been primarily led by a near 50 percent dip in new investments in large projects.

According to the FY12 RBI annual report, "envisaged total fixed investment by large firms in new projects, which were sanctioned financial assistance during FY12, dropped by a whopping 46 percent to about 2.1 trillion from 3.9 trillion a year ago."

The report, released over the weekend, further says the drop was led by the infrastructure and metals sectors. "Envisaged investment in infrastructure declined by 52 percent to Rs 1 trillion in FY12 from Rs 2.2 trillion in FY11, led by the power and telecom sectors," says the report, quoting data collated from banks and financial institutions, adding while investment in the telecom sector has dried up, that in roads, ports and airports has also decelerated sharply.

About infrastructure financing during FY12, gross bank credit to infrastructure outstanding as of April 2012 was 6.2 trillion, says the RBI report. However, the flow of bank credit to the sector has decelerated, on the back of policy delays and higher interest rates, it notes.

Data on sector-wise gross deployment of bank credit shows that its year-on-year growth has declined to 14 percent in FY12 compared to 38 percent growth in FY11. Noting that over half of the envisaged corporate fixed investment in large projects has been coming from the infrastructure space since 2008-09, the report says its share, however, dropped to 48.6 percent in FY12 from a high 54.8 percent a year ago.

This massive slippage has had a ripple effect on the economy. Order books of capital goods producing firms have declined as the size of the pie has reduced. Their share has also gone down as they have been out-competed by cheaper imports by foreign firms, points out the report.