People play cricket in a field as the two towers of Trump Tower Mumbai, center, stand under construction at Lodha The Park, a luxury residential project developed by Lodha Developers Ltd. (Photographer: Dhiraj Singh/Bloomberg)  

New Project Announcements Decline For Second Consecutive Quarter, Shows CMIE Data

Fresh investment proposals have shown a decline for two consecutive quarters despite a pick-up in growth and improvement in capacity utilisation, shows data from the Center For Monitoring Indian Economy (CMIE).

New investments worth Rs. 1.5 lakh crore were proposed during the quarter ended September 30, 2018, according to CMIE’s preliminary estimates. Though an upward revision can be expected in final figures, they would still be lower than the Rs. 2.3 lakh crore in average fresh investments every quarter for the past four quarters, CMIE noted.

A four quarter moving average of new investment announcements had come in at Rs. 2.4 lakh crore for the quarter ended March 2018, the lowest in 15 quarters. This figure has remained flat since.

The past year recorded the worst performance on new investment announcements, wrote Mahesh Vyas, CEO of CMIE wrote in an article on the company’s website. Though the numbers did not see a drop, they have failed to live up to the small promise that a revival in the capex cycle was around the corner, he added.

While CMIE data suggests that new projects are yet to review, broader economic indicators have shown a modest pick-up in investment.

Gross fixed capital formation, an indicator of investment activity, has seen an increase in year-on-year growth since the September 2017 quarter. In the June 2018 quarter, fixed capital formation rose 10 percent over the same period last year, showed the GDP data released by the government. Though there are not as many green field investments happening, brown field investments are taking place, said Saugata Bhattacharya, chief economist at Axis Bank explaining the divergence between the message from the two different sets of data.

Capacity utilisation had hit 75 percent, which also suggests that some pick-up in investments is likely. D.K. Joshi, chief economist at Crisil told BloombergQuint that improving capacity utilisation will set the stage for improved investments.

Capacity utilisation has gone up and companies have began their deleveraging process, enabling them to borrow and invest once again. 
Dharmakirti Joshi, Chief Economist, CRISIL

However, a broad based revival in new projects may be too much to expect in a pre-election year, said Joshi. Uncertainty is not good for fresh investments, he added.