New project announcements by the private sector has fallen by 54 per cent in the third quarter of fiscal 2014 as compared to the same period last year and by 49 per cent over the previous quarter. During the period, new project announcements stood at Rs 161 billion, said a report filed by Citi Research titled ‘India Infrastructure Insight’.
This report — which has collating projects data from CMIE (Centre for Monitoring Indian Economy) — is a further proof of slowdown likely to persist at least till a working government is in place at the Centre.
Historically, says Citi, 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.
Although new projects are not announced, even 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.
It is not just the private sector which 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 year-on-year (YoY) basis and 31 per cent on a quarter-on-quarter (QoQ) basis.
For all the lip service given by the Prime Minister and Finance Minister, Citi said 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.
At the same time, 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 report by Goldman Sachs highlighting the issue avers that 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.