Has the Modi govt walked the talk on reviving public investments?
3 min read 24 Jan 2017, 08:43 AM ISTDespite big announcements on rural infrastructure projects, irrigation projects have not taken off yet
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Soon after the Narendra Modi-led government assumed office, key officials began stressing the role of public spending on capex to revive investments and growth. Halfway into the government’s term in office, talk of such spending still dominates news but data on actual spending suggest that the government has failed to raise the level of public investments significantly over the past few years.
The Modi government began its term on a promising note. By the end of 2014, government project announcements rose to a record high, an analysis of capex data from the Centre for Monitoring Indian Economy Pvt. Ltd (CMIE) shows. The analysis is based on four-quarter rolling averages of new project announcements (to smoothen the impact of lumpy announcements). In December 2014, the rolling four-quarter average capex announcements by the government rose 40.99% over the year-ago period to Rs1.17 trillion.
However, public capex announcements have fallen since then even as private sector project announcements have increased, as the chart shows.
Although private sector project announcements have risen, they have been beset by the lack of clearances, leading to a high proportion of stalled projects in the private sector. While the proportion of stalled projects has declined marginally over the past few years, it has had a very small impact on overall stalling rates. This is because the value of government projects freed up is only 0.30% of the total projects under implementation.
Sectors that the Modi-led government has identified as its priorities have been beset by high rates of stalling. A prime example is the irrigation sector, which was identified as a priority sector by the Union finance minister Arun Jaitley in his budget speech last year.
Speaking at an event to kick-off 99 major and medium irrigation projects in September, the water resources minister reiterated that commitment by promising to spend Rs77,595 crore on getting those projects off the block. In fact, 23 of the 99 were to be completed by March 2017 itself.
However, a look at the capex data numbers for irrigation shows that things have not played out to plan. The proportion of stalled irrigation projects as a percentage of irrigation projects under implementations has spiked sharply to a record high of 8.72% in the quarter ending December. It was 1.75% in the previous quarter. Regular updates on irrigation data are seen since March 2012. The current stalling rate is the highest in this 20-quarter period. The overall value of irrigation projects being implemented has declined from Rs7.18 trillion in September 2016 to Rs6.80 trillion in December 2016.
A total of 88.66% of the stalled irrigation projects by value are held up on account of environmental clearances. This is largely because of the Rs52,000 crore Kurumurthy (Palamuru-Ranga Reddy) Lift Irrigation Project that the Telangana government has undertaken. Other issues include lack of funds, and land acquisition problems.
The data on capex suggests that the government’s execution of projects have lagged announcements so far. At a time when overall investments in the economy are declining and India’s growth forecasts have been trimmed because of demonetisation, the government’s role becomes critical in reviving the capex cycle. The earlier part of this series showed that the government has been slow in unclogging the pipeline of stalled private sector projects. This analysis shows that the tardiness extends to the government’s own projects in its thrust areas. Till the government can show results on the ground, we should take new project announcements by ministers—whether in the upcoming budget, or later—with a big dose of salt.
This is the concluding part of a two-part data journalism series on capex spending in India.
