Home / Economy / Capex plans continue to slide in September quarter, shows CMIE data

NEW DELHI : Amid an uncertain global environment, capital expenditure plans of Indian companies continued to lose steam in the September-ended quarter, albeit at a slower pace. Government and private companies announced capex projects worth a combined 3.3 trillion during the quarter, recording a sequential decline of 25.8%, according to fresh data from the project-tracking database of the Centre for Monitoring Indian Economy (CMIE).

In April-June, the decline was much sharper, at 48.1%. Compared to the same quarter in the previous year, the decline in the just-ended quarter was 58%, led primarily by the government sector, which saw a drop of 79%. Capex plans announced in the private sector rose 16.3% in terms of value.

The numbers are provisional and may be updated later.

With the effects of the covid-19 pandemic ebbing, capex plans had seen sequential growth momentum between the March 2021 quarter and the March 2022 quarter. However, disruptions caused by the Russia-Ukraine war and monetary policy tightening around the world have become headwinds for investments in the country.

State governments did the heavy lifting during the September quarter, with the value of projects they announced trebling on a sequential basis. New projects announced by the central government, on the contrary, fell dramatically by 91%.

Within the private sector, new projects by Indian companies fell 25%, while those announced by foreign companies offered some relief. New project announcements by foreign private companies increased 4%.

Against the backdrop of the Russia-Ukraine war, Icra expects only a back-ended pick-up in capex later this fiscal year, according to a 28 September report by the rating agency.

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The slowdown was more pronounced in some sectors. In the manufacturing sector, which has the largest share in capex projects, project investments rose 6.3% sequentially. In electricity and construction/realty, the figure declined by 63% and 65%, respectively. On a year-on-year basis, project investments in the electricity sector were higher by 65%. Construction and real estate performed poorly even when compared to the same quarter last year as heavy rainfall disrupted construction activities, while higher mortgage rates dampened demand for real estate.

Project stalling rates, calculated as the value of stalled projects as a proportion of total projects under implementation, continued to moderate during the quarter. The stalling rate in the private sector fell further to 19.8%, while the same in the government sector was flat at 4.5%.

Despite the setback seen in the government sector, project completion was up during the September quarter. The value of completed government projects rose 54.3% after having been in the negative territory for the past two quarters. The private sector’s completion rate declined 57.9%, after having risen 45.2% in the previous quarter.

“We are still waiting to see corporates undertaking any massive projects so far and (they) have instead de-leveraged significantly due to improvement in profitability," Kotak Institutional Equities said in a report last month. While the cycle could turn, the macroeconomic uncertainty could dissuade companies from making large debt-funded investments, it said.

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