Investments lowest in 12 quarters for new projects: Report

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Updated: January 4, 2019 2:48:50 AM

According to a recent Crisil report, the share of private sector investments in India’s infrastructure sector hit a decadal low in financial year 2017-2018 with gaps in policy, project structures, institutional capacity and contracts leading to a spike in stalled projects and debt levels, and a dip in the investment momentum.

This is much higher compared to the figure of Rs 15,486 crore in the three months ended December 2017, as well as compared with Rs 25,298 crore seen during July-September 2018.

New project investments have been the lowest in 12 quarters at about Rs 1 lakh crore for the three months ended December 31, 2018, indicating a slowdown in the Indian economy, latest data from Centre for Monitoring Indian Economy (CMIE) show.
According to some media reports, this number is lowest in 14 years, and has been lowest since mid-2004.

While the private capex remains sluggish as companies continue to focus on pruning balance sheets and deleveraging, the numbers come as a surprise because the government/public sector investments also don’t seem to be enough to move the needle. The new investments have declined over 55% on a year-on-year basis, while sequentially it has fallen nearly 53%.
The project cost of those shelved during the quarter stood at `1,305 crore, a decline of 98% y-o-y, while on a quarter-on-quarter basis, the number came in lower by 79%. However, the projects announced and stalled stood at a record level of over `3 lakh crore.

This is much higher compared to the figure of Rs 15,486 crore in the three months ended December 2017, as well as compared with Rs 25,298 crore seen during July-September 2018.

While the pace of ordering had improved in the last two quarters, capital goods and heavy engineering majors have continued to state that the operational environment in India continues to be challenging. R Shankar Raman, CFO, Larsen and Toubro, in his commentary for the September 2018-ended quarter had listed funding and liquidity constraints along with government distractions as major headwinds.

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MS Unnikrishnan, MD & CEO, Thermax, had recently told FE that the kind of orders happening cannot move the needle for Thermax or for the country. He said investments for larger power plants, refinery expansions etc are not happening.
According to a recent Crisil report, the share of private sector investments in India’s infrastructure sector hit a decadal low in financial year 2017-2018 with gaps in policy, project structures, institutional capacity and contracts leading to a spike in stalled projects and debt levels, and a dip in the investment momentum.

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