India Inc is slowly putting its investment plans back on track. Data from the Centre for Monitoring Indian Economy, a Mumbai-based research house, show “investment intentions” in the just concluded financial year were 80% more than that of 2013-14.
In fact, at Rs 9.8 lakh crore, this is the highest in the past four financial years.
The encouraging sign is that the private sector, which was slow in announcing their plans in the April to June quarter of 2014-15, more than made up for it in the subsequent quarters. The private sector’s share in the total new investment announcements in the March quarter rose to 75% from 46% in the earlier two quarters. Out of the 449 projects, 266 projects with investments worth Rs 1.46 Lakh crore were proposed by the private sector.
However, the celebrations are still muted. Mahesh Vyas, CMIE’s managing director, said the sharp increase in FY 2014-15 could be attributed to the low base of new investments proposed in the previous two years.
Also, the optimism seems to have been limited to “ïntentions” alone. In fact, the number of new project announcements in the manufacturing sector in 2014-15 declined by six% on a year-on -year basis despite the Modi government’s ‘Make in India’ push. In the manufacturing sector, 469 projects with investments worth Rs 2.4 lakh crore were announced.
Others advise against over-enthusiasm over these figures. D K Joshi, Crisil’s chief economist, said there were hopes in the medium term, but private sector companies are still quite cautious because of idle capacities prompted by low demand. ”Since export is also weak and the government doesn’t have fiscal flexibility to spend more, it will take time for demand to pick up,” he added.
Also, a lot of ground still needs to be covered to convert the investment intentions into actual investments, experts say.
Others see some ray of hope in the reduction in the number of stalled projects. The number declined on a year-on-year basis for the third consecutive quarter in 2014-15. In the March quarter, a total of 144 projects were “stalled” with investments of Rs 82,200 crore. This was lower by 39% as compared to 166 projects with investments worth Rs 1.3 lakh crore in the March 2014 quarter.
Completion of projects in fiscal 2014-15 saw a marginal increase of 1.6% year on year. As of today, 1,116 projects worth Rs.3.35 lakh crore have been commissioned.
High cost of funds is another major factor for several stalled projects. A M Naik, chairman of Larsen & Toubro (L&T) had told Business Standard in a recent interview that “no private sector project will take off at such high interest rates. The rate should not be more than 10%”.