New investment proposals fall 74% in December quarter: CMIE

Investments worth Rs 1.05 lakh cr across 381 new projects announced

Confirming the subdued sentiment prevailing across the corporate sector, investment proposals to set up new capacities declined substantially in the quarter ended December 2015, according to the economic think tank Centre for Monitoring Indian Economy (CMIE). Investments worth Rs 1.05 lakh crore across 381 new projects were announced in the December 2015 quarter, which is 74 per cent lower than the third quarter of FY15. In the December 2014 quarter, the sentiment was upbeat on hopes from the Bharatiya Janata Party (BJP)-led government at the Centre and companies had planned investments of Rs 4 lakh crore, which at that time was the highest in the past 17 quarters.

According to the data, proposals in real estate, steel and cement sectors are seeing slowdown or cancellation. In real estate, new intentions have been much lower while in cement and steel, projects were scrapped, reflecting bearish mood of promoters.

In what could be a positive sign, stalled projects dropped sharply to Rs 16,500 crore, lower by 86 per cent compared to the December 2014 quarter, and 60 projects were shelved. The average quarterly stalling of projects between 2011-12 and 2014-15 was to the tune of Rs 1.3 lakh crore, according to CMIE.

Steel and cement sectors witnessed scrapping of seven projects with investments of Rs 6,000 crore. Lack of promoters’ interest and unfavourable market conditions remain one of the major reasons for dropping the projects.

Dharmakirti Joshi, chief economist at CRISIL, said, “Weak sentiment in Indian corporates, high level of private sector debt, weak demand, and excess capacities in the system are not painting a positive picture for corporate investments. Although the government is trying to improve the atmosphere by ease of doing business, the real improvement could come when demand improves, which will take some time.”

In the December 2015 quarter, 95 projects worth Rs 55,100 crore were announced in the manufacturing sector. This was lower by 11 per cent compared to the average quarterly new investments of Rs 62,300 crore announced in the sector in 2014-15. Large projects in the December 2015 quarter were announced in chemicals, textiles, consumer electronics and food sectors.

The power sector attracted investment proposals worth Rs 23,000 crore in 31 projects. Out of these, 10 are solar power projects and investments in these are worth Rs 15,100 crore.

Only 39 real estate projects were announced in the last quarter compared to 99 projects in the December 2014 quarter.

Commissioning of projects during the quarter ended December 2015 dropped 49 per cent on a year-on-year basis with 246 projects of Rs 45,000 crore investments being commissioned, the lowest level since December 2008. However, the aggregates for commissioning of projects are expected to go up, as information on project commissioning comes in with a lag.

Manufacturing sector witnessed commissioning of 60 projects. Out of these, cost was available for 31 projects and the total investment in these amounted to Rs.57 billion. The largest project commissioned in the sector was BPCL’s Crude Distillation Unit (CDU) and Vacuum Distillation Unit (VDU) replacement project in Mumbai, Maharashtra. Investment in the project is estimated around Rs.14 billion.

Projects worth Rs 220 billion were commissioned in the power sector adding a total capacity of 1,472 Mw. 46 projects with investments worth Rs.75 billion were commissioned in the transport services segment. Of these 25 are road projects with investments worth Rs 38 billion. These completed projects will add a road length of 412 kms. Real estate segment witnessed commissioning of 38 projects.