.jpg?downsize=773:435 "New Project Announcements In India Lowest In Last Three Years")
SpiceJet Ltd.'s deal to acquire new aircraft from manufacturer Boeing Inc. last month was one of the few bright spots in capacity expansion for the June quarter as new project announcements plunged sharply.
Overall, 448 projects worth Rs 1.4 lakh crore were announced during the April-June quarter of the current fiscal, the lowest in the last three years, according to the latest data from think-tank Centre for Monitoring Indian Economy (CMIE). This was lower than expenditure in the October-December quarter of last year, when demonetisation hit new investment proposals across the country.
While the private sector managed to maintain the new level of project announcements in the following two years, the government lost steam.CMIE Report
CMIE attributes the drop in investment announcements to excess capacity build-up, weak demand and leveraged balance sheets of companies. Sectors such as power, cement, steel have are suffering from low capacity utilisation levels and have "almost" lost their pricing powers, according to the think-tank's report.
Moreover, the account books of banks are already saddled with bad debt which in turn has made them catious in lending to new projects, the report added.
Another reason why new investments are not growing fast in the country is the lack of any meaningful progress in getting stalled projects off the ground. The value of stalled projects also went up in the quarter to Rs 2.4 lakh crore compared to 0.35 lakh crore in the quarter ended March, CMIE said.
More than 25 percent of the new investments in the first quarter were for the procurement of aircraft. SpiceJet Ltd.'s deal to acquire 20 Boeing 737 Max 10s planes, along with 50 Q400 Turboprop aircrafts was valued at around Rs 26,100 crore. This was followed by market leader IndiGo's Rs 8,400-crore deal with French-Italian ATR to buy 50 turboprop aircraft, the report showed.
According to CMIE, these projects would not have a significant impact on economic growth as there won't be any fresh demand for steel, cement or other construction items, but "merely an outflow of dollars from India".
These projects are going to generate limited employment unlike manufacturing projects which create large scale employment.CMIE Report
CMIE expects the weak trend to continue till demand picks up and capacity utilisation of industries start rising.
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