The mystery of Rs 8-trn gap between dropped, completed projects in capex

Govt's contribution in the trend is now trending higher than the private sector's

The value of dropped capital expenditure (capex) projects was more than twice the value of completed ones for the four quarters ending December 2023.

The total value of completed projects was Rs 6.9 trillion on a trailing four-quarter basis, shows data from the Centre for Monitoring Indian Economy (CMIE). The value of dropped projects was Rs 15 trillion. This Rs 8.1 trillion gap between completed and dropped projects has remained across investment cycles (Chart 1).

The earliest data, going back to December 2009, shows a marginally lower value of completed projects than those being dropped. Dropped projects include those that are abandoned, shelved and stalled, as well as those for which no information is available. Capex is investment in roads, factories and other long-term assets. The government has been pushing for greater capex to help push growth and has driven much of the incremental investment in the country before tapering off in recent months.

The value of government-backed dropped projects has exceeded private sector ones in the recent past. This may reflect lower private sector activity, or because the government dropped unviable projects. The government dropped projects worth Rs 8 trillion in the four quarters ending December 2023. It was Rs 7.1 trillion for the private sector. (chart 2).

Manufacturing had dropped projects worth Rs 4.4 trillion in December 2023 compared to Rs 2.5 trillion in December 2019. It overtook electricity projects, which accounted for the second largest share in dropped projects before the pandemic. Around Rs 5.3 trillion worth of electricity projects were dropped in the four quarters leading up to December 2019. In December 2019, services had the largest share of dropped projects: Rs 7.8 trillion. It has since eased to Rs 4 trillion (chart 3).

The services segment, the largest driver of India’s economy, is expected to grow slower in 2023-24 than in the previous year.