Bad news for Indian economy: Fresh private investments plunge 64% in Q2

The bad loan problem, coupled with global headwinds like interest rate hikes in the US and continuing sell-offs in emerging markets, has started hurting the confidence of investors.

New investment announcements have declined in the July-September period for the second quarter in a row, show data compiled by the Centre of Monitoring Indian Economy (CMIE).

Private and public sector companies together announced new projects worth Rs 1.49 trillion in the quarter which ended in September, 41% lower than the preceding quarter. On a year-on-year basis, the decline was less pronounced at 12%.

Fresh private investments plunged 64% in the quarter ended September, on a sequential basis. Compared to a year ago, the decline was relatively modest at 31%.

For the first time, the value of new projects announced by private players during the quarter was lower compared to those announced by the public sector.

The shrinking private investment is not good news for the economy, which is in a recovery mode.

The share of stalled projects also increased marginally during the July-September quarter. As much as 24% of all private projects remained stalled during the quarter under review.

The power sector was hit hardest, with the highest share of stalled projects at 35.5%, followed by the manufacturing industry which had 29.5% projects stalled.

Projects got stalled mainly due to lack of funding, fuel and raw material shortages and unfavourable market conditions.

On the bright side, project implementation gathered pace during the quarter. “There is a pick-up in implementation of projects, which will have a positive impact on GDP growth, though not so much on employment,” Mahesh Vyas, managing director and CEO, CMIE, told The Wire.

Also encouraging is the rise in new projects in the manufacturing sector, which witnessed a sharp recovery from the lows of the June-ended quarter. Yet, the value of new manufacturing projects in the September quarter is lower than what it was in the March quarter, data showed.

In arrangement with TheWire.in