NEW DELHI: New project starts saw a disappointing 22.1% year-on-year fall in the December, 2024 quarter reversing the trend in the September, 2024 quarter when they had recorded a smart 43% y-o-y increase.
Data from the Centre for Monitoring Indian Economy (CMIE) reveals that the total value new projects announced in the December, 2024 quarter was Rs 6 lakh crore. This is much smaller than the Rs 7.7 lakh crore worth of investments announced in the December, 2023 quarter and the Rs 7.2 lakh crore worth of projects announced in the September, 2023 quarter.
Announcements from both the private sector and the government slowed belying expectations of a meaningful pick-up in capex. While a host of companies are investing, especially in sectors such as renewable energy, capital goods, the quantum of investments taking place was expected to be bigger. Worryingly, the value of projects completed by the government and the private sector, were down 57.1% y-o-y and 40% y-o-y respectively.
The Centre’s capex in the April-November period has contracted 12.3% on year to Rs 5.13 lakh crore. To meet the target set out in the Budget 2024-25 of Rs 11.11 lakh crore, the expenditure needs to grow at 65% on year in the December-March period, a somewhat tall ask, say analysts.
In the latest ‘Monthly Economic Review’ report, the finance ministry had observed there are signs of capital formation growth rebounding early in H2 of FY25, with the central government’s capex picking up pace. “The order books of infrastructure and capital goods grew sharply in FY24 and H1 of FY25, indicating a pent-up investment impulse that will play out in the quarters ahead,” the review noted.
The slower government spending and project announcements have been attributed to the general elections and some state elections. ““Nevertheless, we expect to see a rapid uptick in project announcements and project awards by both the Centre and states in the March quarter, Suman Chowdhury, chief economist, Acuite Ratings and Research said. The shortall in spends vis a vis the target is unlikely to be very significant,” Chowdhury said.
Experts note that the weak consumption demand and poor visibility on the demand recovery in urban India could be stalling investments by the private sector.
At the aggregate level capacity utilisation in the manufacturing sector recorded a seasonal decline to 74% in the April-June period from 76.8 % in the January-March period, the Reserve Bank’s OBICUS (order books, inventories, and capacity utilisation survey) survey revealed that.
The seasonally- adjusted capacity utilisation, however, increased by 120 basis points to 75.8%. As a ratio to sales, both the finished goods inventory and the raw material inventory remained stable during the quarter. The survey was conducted during Q2FY25 and covered 905 manufacturing companies.
Source: The Financial Express
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