That the economy is
on a steep slide because of drying up of investments is clear from the
fact that corporates have shelved projects worth a whopping Rs 1.8
trillion (Rs 1.8 lakh crore) during April-August period, according to
CMIE.
The
agency believes that the project completion in FY13 will be worth Rs
5.6 trillion and in FY14 it could be Rs 5.8 trillion. This implies a
quantum jump over the project completion of Rs 4.1 trillion last fiscal.
Significantly,
this is not due to high interest rates, as is being claimed by every
industry lobby, but mostly on account of delays in getting land and
environmental clearances among others.
Project
shelving, which has been on rise for the past 18 months, had peaked at
Rs 4.5 trillion last fiscal, the Centre for Monitoring Indian Economy
(CMIE) said.
The
prime reason behind shelving of projects was problems being encountered
in land acquisition, securing environmental clearances, local unrest,
lack of availability of fuel or raw materials, particularly the mined
ones like coal and iron ore, it added.
A
few promoters have cited inadequate availability of cheap funds and
poor demand also as the reasons to abort the projects, according to the
independent economic think tank.
"We
expect project shelving to remain high or rise even further in the
coming months. A huge pipeline of projects has got built up in the past
few years because of the rush among companies to announce new projects
since the capex boom began in 2004-05," CMIE said.
Outstanding investment rose six times since the beginning of 2005-06 and stood at Rs 141.8 trillion by the end of June 2012.
In
a capex cycle, as more and more investments get announced, promoters of
all projects in their initial stages re-assess their projects in the
light of increased competition and the relatively weaker projects get
shelved.
The
CMIE data shows that the large and capital-intensive industries have
seen huge capacity additions in the past few years. And their capacity
utilisation has fallen as the demand has not grown at the same pace.
"A
large number of projects are scheduled for completion in the next two
years. Their completion will lead to a further decline in the capacity
utilisation of these industries. Hence, we expect promoters to be
selective in implementing fresh projects going forward," CMIE said.
It
is, however, hopeful that it is unlikely to have any impact on the
project completion in the next two years, as a large number of projects
are in advanced stages of implementation and there are unlikely to get
shelved.
As
per CMIE's capex database, projects worth Rs 9.3 trillion are scheduled
to get completed this fiscal and worth Rs 9.6 trillion next fiscal.
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