CMIE Data Suggests No Pick-Up In Private Investments

New project announcements in India fell 22 percent in the quarter ended June indicating no pick-up in investment activity, data by the Centre for Monitoring Indian Economy suggests.

Indian companies announced fresh projects worth Rs 2.1 lakh crore in the three months ended June, according to the CMIE data cited in a report by Motilal Oswal Securities. The decline was mainly led by a fall in new public-sector projects. The share of new government projects, the report said, fell to its lowest in 14 years.

Government spending pulled along the Indian economy in the absence of capital expenditure by the private sector amid excess capacity and mounting bad loans in the last two years. That's slowly changing though. Capacity utilisation rose to 74.1 percent in the quarter ended December compared with 71 percent a year ago, according to the Reserve Bank of India's survey. That, according to a Yes Bank Ltd. report, suggests that the private sector would make a comeback as rural and urban demand improves.

CMIE, however, doesn't see the expected recovery yet. While the share of private sector projects in the June quarter increased 24 percent over the year-ago period, it was led by a single order. The Rs 1.3-lakh-crore purchase order for Boeing aircraft accounted for three-fourths of the value of the new projects, the Motilal Oswal report said. Excluding this, new project announcements fell 72 percent. Fresh investments in sectors such as manufacturing, metals and transport equipment declined during the period, the report said.

Project Completion

The number of projects completed in the year ended March 2018 was the lowest in three years on temporary disruptions due to the note ban and the rollout of goods and services tax, the report said. Project completion in 2017-18 declined 42 percent over the previous year.

Projects in sectors such as electricity, real estate, construction and transport services were delayed.

Stalled Projects

The number of stalled projects in the June quarter was down from its March peak of 12.2 percent. The stalling rate now is at 10.8 percent, the CMIE data show. Lack of environmental clearances, low fuel availability, insufficient funds and land acquisition-related problems are mainly responsible. Power, manufacturing and metal sectors were worst affected.

Capital Expenditure

Despite the fall in fresh investments, public sector contributes around 62 percent of the projects under implementation, according to the CMIE data. Sectors showing strong growth are textiles, consumer goods and transport equipment.