Fresh Investments In India Fall To A New Low In December Quarter; Lowest In 14 Years

The fresh data from the project-tracking database of the Centre for Monitoring Indian Economy(CMIE) shows that the desire to see a quick economic turnaround in the last quarter didn’t materialise. This downfall might not be a good sign for the Modi government, which is preparing to go into the election without any negative remarks. Indian companies have announced new projects of Rs 1 trillion in the December quarter. This is 53% lower than the announcement made in September quarter and 55% lower than the last year, reported the Live Mint.

Private and Public sector face drop in new project announcements

Both the private and public sector witnessed a severe slump in the new project announcements. New private sector projects plummeted 62% in the December quarter when compared with the September quarter. It fell by 64% when compared with the December quarter of FY18(the Financial year 2017-18).

Even when it comes to public sector projects, the data are not very soothing. The September quarter of FY19(the Financial year 2018-19) saw relatively more new public sector projects than the December quarter of FY19. The December quarter saw a 37% drop in fresh investment announcements and 41% drop from last year. The investments of both public and private sectors combined show a steep deterioration of Rs1.15 Trillion from the previous quarter and Rs 2.23 Trillion in the same period last year.

Through these data, another important revelation was that the value of stalled projects escalated in the FY19 December quarter. It has been found that the stalling rate of the private sector has touched the record-breaking high of 24%.

Uncertain policy and bad debts deter Indian industry

One of the significant reasons resulting in a severe drop in fresh investments is a significant decline in investments, half-hearted demand and change in the macroeconomic environment. Mahesh Vyas, CEO of CMIE told Quartz that capacity utilisation has been under 75%. This is much lower than what attracts new investments. Indian industry is attrited due to bad debt, rising policy uncertainties in front of the polls, and the significant rise in the stalled projects. It is further expected that as the Lok Sabha elections approach, rising political uncertainty will swerve the investors from investing. The surge in farm loan waivers has already instigated state government to cut on CapEx(capital expenditure) spending. This trend is likely to continue in the coming years.