CMIE India Capex Data: What it says about the Investment Growth

The recently published data by CMIE about India capex for 3QFY19 was not great news for someone who was hoping that the investment cycle is picking up in India. According to the data, new projects announced in 3QFY19, at Rs 1.1 lakh crore, were down 48 per cent on yearly basis and 46 per cent down on sequential basis, despite a low base of last year.

Key sectors that led such fall were metals, power generation, fertilizer and power transmission and distribution. The sectors that saw a major uptick in the activity were manufacturing, chemicals, metals, textiles and real estate. When it comes to who led to such a fall in numbers, we observe that it was the private sector that scaled down their investments. The private sector accounted for 56 versus 62 per cent of the total of new projects in the same quarter last year.

Something that came well out of the data was that stalled projects, though down on yearly basis were up on a sequential basis. Stalled projects account for 10.8 per cent of the projects under implementation. The primary reason for stalling the project was ‘other issues’ which accounted for the 40% of the stalled projects. 

The sharp decline in the project announcements was primarily due overhang of bad debt, the impact of recent elections in three states coupled with the upcoming general elections in May 2019, and the lack of much progress in unclogging the pipeline of stalled projects.

Another good part of the data was the quality of announcements was better as projects with low‐visibility were nil vs. 9% YoY. 

Hence, we believe that, though the green shoots of revision in investment cycle are visible it is still a couple of quarters away.