The number of new projects announced plunged to the lowest level in more than two decades in the June quarter (Q1FY27), reflecting the uncertainty caused by the West Asia war and persisting investor wariness in most capital-intensive sectors other than data centres and nuclear plants.
The spike in oil prices and disruption in overseas trade have seemingly prompted companies, especially those in the government sector, to defer new projects till the geopolitical clouds dissipate.
Only 663 new projects were announced in the April-June quarter of the current fiscal year, compared with 1,275 projects in the corresponding period last year and 1,172 in the January-March quarter of the current year, data from the Centre for Monitoring Indian Economy (CMIE) show. The count of new projects in the June quarter is less than half of the average of 1,370 in the twelve quarters through that quarter.
The last time new projects were less in number than in Q1 this fiscal year was in December 2005.
The weakness in project approvals is spread across the government and private sectors. Of the 663 new projects announced in the June quarter, 369 were in the private sector. The number of private sector projects was down 45%, while government projects contracted 48%. In fact, the number of government projects contracted for four quarters in a row.
The dip in the number of projects across key sectors, even when the overall project values are up, also indicates waning participation from the larger universe of firms, and a concentration of capex intent among a section of Corporate India.
Private Capital Dominates
In value terms, new projects worth Rs 14.6 lakh crore were announced in Q1FY27 compared with Rs 11.4 lakh crore in the corresponding quarter the year before, a year-on-year increase of 28%. Sequentially, declaration of investment intents, however, grew just 2.6%. Nuclear power and data centres account for 80% of the total investment by value in the quarter. Sequentially, declaration of investment intents grew just 2.6% in June quarter.
Significantly, in value terms, the share of the private sector in new projects announced in the June quarter touched 90%, the highest ever. There has been a steady rise in the share of the private sector from 67% in Q4FY25.
The top seven projects, which account for 74% of the total quarterly project count in Q1FY27 were data centres and nuclear plants. These two sectors remained insulated from the West Asia war and increasingly depend on each other. Nuclear power and data centres account for 80% of the total investment by value in the quarter.
Madan Sabnavis, chief economist, Bank of Baroda, says data centre is the big thing that has also been covered in the budget announcement. “Given the growing importance of artificial intelligence (AI) and data centres we can expect investment to increase in coming months and be agnostic to war conditions,” he says.
Gaura Sen Gupta, chief economist, IDFC First Bank, says the tentativeness in private capex reflects the volatile global environment due to tariffs last year and the West Asia crisis this year. “The slowdown in government capex might reflect a shifting of focus to ensuring essential fuel supplies during the peak period of West Asia escalation,” she says.
Nuclear Power
Conventional electricity, which houses the nuclear proposals, drew Rs 6.8 lakh crore in the June quarter this year, compared with just Rs 13,300 crore during the same period a year ago. In value terms, the share of the electricity sector in new projects announced touched an-all time high of 50% in the three months to June this year, reflecting large-scale capacity additions across thermal, renewable, and storage projects.
Information technology, which includes data centres, drew Rs 4.8 lakh crore in the three months to June this year, compared with Rs 15,180 crore during the corresponding quarter last year. Every large data center proposal in the quarter ended June this year is sited in Maharashtra and the state has turned to nuclear power to feed the demand.