Transport Services Lead Spike In New Projects In Third Quarter, CMIE Data Shows
Smoke billows from a steel plant in India. Photographer: Dhiraj Singh/Bloomberg

Transport Services Lead Spike In New Projects In Third Quarter, CMIE Data Shows

New projects rose nearly threefold sequentially in the third quarter, led by a jump in transport services.

Aggregate capex in new investment projects announced soared to Rs 4.28 lakh crore in the quarter ended December compared to Rs 1.5 lakh crore in the previous quarter, according to data from the Centre of Monitoring the Indian Economy.

The sudden jump in new investments, however, has been concentrated in the transport services segment, where nearly 55-60 percent of the total new investment announcements have taken place, said Madan Sabnavis, chief economist at CARE Ratings. If this amount is excluded, the total new investment would be just Rs 1.8 lakh crore—which is higher than the previous two quarters but lower than December 2018 quarter, he said.

Excluding transport services, we have not seen an uptick in these new investments announced in other sectors, making it difficult to conclude that investment has turned around.
Madan Sabnavis, Chief Economist, Care Ratings. 

Devendra Pant, chief economist at India Ratings and Research, said the spike, driven by just a couple of industries, indicates that there is not much change in project announcements. With weak demand conditions and low capacity utilisation, it is unlikely that there will be a sustained increase in fresh investments, he said.

According to Sabnavis, while Rs 2.44 lakh crore was from transport services, new investment projects announced in manufacturing also rose to Rs 85,341 crore in the third quarter from Rs 31,549 crore in the preceding quarter. This, he said, was led by chemicals and machinery.

According to CMIE, the surge was driven solely by the Rs 2.3 lakh crore worth aircraft acquisition announced by IndiGo and Rs 70,000 crore worth expansion of the Jamnagar refinery announced by Reliance Industries Ltd.

Mahesh Vyas, managing director, CMIE advised ‘caution’ while reading into the uptick in new investment projects. “More than half of it was on account of around 300 new aircraft purchased by IndiGo,” said Vyas.

He said one should wait and watch to understand the direction of the capex cycle. “The revival is still six quarters away.” While he expects 2020 to be sluggish year, an uptick in capacity utilisation levels cannot be ruled out.

While the value of completed projects and revived projects saw a modest rise, the value of implementation stalled projects fell in the December quarter.

  • The value of projects completed in the December quarter rose to Rs 1.36 lakh crore in the October-December period from 0.79 lakh crore in the preceding quarter.
  • Stalled projects stood at Rs 0.6 lakh crore from Rs 0.4 lakh crore in the same duration.
  • Revived projects rose to Rs 0.8 lakh crore in December from Rs 0.5 lakh crore in September.
  • Projects on which work begun but was stalled during the quarter, fell to Rs 0.13 lakh crore in December from Rs 0.74 lakh crore in September.

New Investments Metric Much Better Than Last Two Quarters, Says CMIE’s Vyas

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