New project investments in India at 14-year low: CMIE

In a development that could dent the economic outlook for 2019, new investments in India have come down to a 14-year low in October-December period with projects worth only Rs 1 lakh crore being launched in the period as against Rs 4 lakh crore at the beginning of the year.

Data from the Centre for Monitoring Indian Economy (CMIE) showed that the stalled projects remained at a record level. Almost all major sectors of economy witnessed a fall with the decline in fresh investments across the board.

Worse, a time series analysis of data from CMIE showed that the decline in new projects began three-and-a-half years ago in June 2015. The reason for such a long drought appeared to be lower capacity utilisation that has more to do with the demand compression in the economy.

The new data appeared puzzling as it came on the back of rising in Gross fixed capital formation (GFCF) to 12.4 % in the June-September quarter, according to the government data which also showed double-digit growth for the last four quarters. GFCF is the barometer of investment in the economy.

Even the Reserve Bank of India analysis showed that the capacity utilisation was at 76%, which was higher than the long-term average of 75%.

Economists said the current period of investment growth was led by government investments and private investments remaining almost muted. New private sector projects fell 62% in December compared with the September quarter.

Among the stalled projects, the worst affected were in power and manufacturing sectors. While the power sector accounted for 35.4% of all stalled projects, manufacturing was responsible for over 29%.

According to MD and CEO of CMIE, Mahesh Vyas, financing was not a major reason for projects delays but the land acquisition was one among other reasons. The only sector which showed some improvement in the December quarter was construction but that came on a low base. Vyas said the road sector was doing well and the latest pick up in demand for cement and steel came from there.