 "New projects by private sector at historic low")
In case someone needed it, here is further proof that slowdown is likely to continue atleast till a working government is in place at the centre. Private sector new project announcements are at historical lows in India. A report filed by Citi Research titled 'India Infrastructure Insight #32' collating projects data from CMIE (Centre for Monitoring Indian Economy) says that new project announcements by the private sector has fallen by a whopping 54 per cent in the third quarter of FY14 as compared to the same period last year and by 49 per cent over the previous quarter. New project announcements stood at Rs 161 billion.
Citi says that historically any uptick in capex in India has been driven by the private sector, thus a sharp decline in their announcement paints a dismal picture of capex cycle for the country.
Even as new projects are not being announced, work on the existing ones have also slowed down. Completed projects fell by 61 per cent over the previous year and 33 per cent over the previous quarter. Even as the private sector has slowed down their activity, even government sponsored projects seem to have applied the brakes. Completed government projects fell by 56 per cent on a YoY basis and 31 per cent on a QoQ basis.
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For all the lip service given by the Prime Minister and Finance Minister, Citi says the various measures by the government have so far had very limited impact on the ground. Citi uses the quantum of stalled projects data to draw home the point. After remaining stable for nearly four quarters, quantum of under-implementation but stalled projects have increased by 10 per cent over the previous year and 9 per cent over the previous quarter.
The only silver lining is the sharp increase in announcements of government projects. New projects announcements by government has shot up by 10 per cent on a YoY basis and 2.2 per cent as compared to the previous quarter.
Mood in the private sector is so low that after 40 quarters, government projects are higher than those by the private sector for three consecutive quarters. A Goldman Sachs report highlighting the issue says that while 31 per cent of the projects addressed to it has been cleared by the CCI, real implementation of those will be key to re-start the capex cycle.
Citi feels that new project announcements are likely to fall further as private new projects are unlikely to pick-up before the general elections in mid-2014. Worst, even government projects will come down as election dates are announced.