Green shoots for stalled projects
Number of such projects in the March quarter lowest since December 2008
The Centre has finally managed to break the chokehold of stalled infrastructure projects, by giving faster clearances and closely monitoring these at the highest level.
According to the Centre for Monitoring Indian Economy (CMIE) data released on Monday, only 24 projects under implementation were stalled as of March. The investment in these projects was ~25,700 crore — the lowest in any quarter since December 2008. In the March 2016 quarter, it was ~92,000 crore. The previous United Progressive Alliance government had been haunted by the piling up of stalled projects.
“Capex data suggest demonetisation did not adversely impact the investment trends in the country. New investments have continued at this trend and the number of projects getting stalled has reduced. This is a relief, but we need to move beyond to see the required turnaround in investments,” said Mahesh Vyas, chief executive officer (CEO) and managing director (MD), CMIE.
“The March 2017 quarter capex aggregates results also show a substantial fall in projects getting abandoned, shelved or stalled,” CMIE said. The value of dead projects fell from ~1.1 lakh crore in the March quarter of 2016 to ~32,000 crore in the March quarter this year.
Prime Minister Narendra Modi had announced the demonetisation of the old series ~500 and ~1,000 notes on November 8 last year, sucking out about 86 per cent of the currency in circulation, and adversely impacting demand.
Some experts had claimed this was likely to hit infrastructure projects as well.
Fewer stalled ones suggest large infrastructure projects in the country are finally taking off.
The government has been taking several steps to boost this, such as making it easier to get clearances for land acquisitions and environment.
With GVK winning the bid for construction of the Navi Mumbai airport in February, a major stalled project has finally moved forward, said analysts.
CMIE said there was also a revival in projects that had been abandoned earlier by the companies.
According to its data, projects worth only ~4,400 crore were abandoned during the March 2017 quarter. This included the infamous steel flyover in Bengaluru. In a worry for the Karnataka government, CMIE pointed out that most of the abandoned projects — seven of 18 — are in and around its capital city.
CMIE said this was the lowest number of abandoned projects in the past eight years. Their total value is just a 10th of the average over the past eight years.
Does this data then suggest that India Inc is out of the woods?
Analysts said the economic recovery is still fragile and there was still a long way to go. “The recent index number suggests the production at each of the eight infrastructure industries in February has been lower than the levels achieved in the past 10 to 12 months. This clearly indicates that economic recovery, particularly the investment cycle, is still fragile, and the infrastructure industries will continue to struggle in the foreseeable future,” said Sunil Kumar Sinha, principal economist, India Ratings and Research.
Another worry is the overall public sector capital expenditure, which was fuelling the economic recovery in recent years, is likely to fall in 2017-18.
Any economic growth momentum, economists said, would depend on how corporate entities deleverage their balance sheet through asset sales, and whether or not the country would get another spell of normal monsoon.
Besides, how the country adopts the goods and services tax also remains to be seen. Any volatility in the currency might also impact projects that depend on foreign loans.