Inflation | Completion rates for projects in India fall to precipitously low levels: Data
Depleted demand and uncertainty over return of some form of normalcy will continue to dent the capacity-expansion investment projects initiated by the private sector, the Centre for Monitoring Indian Economy said. This is contrary to many economic indicators which have shown a substantial albeit incomplete recovery in the second quarter, it said.
Data from CMIE’s CapEx service that tracks the initiation, implementation and completion of capacity-expanding projects shows the completion rates for projects in India has fallen to precipitously low levels ranging between 0.2-0.28% in the first two quarters of the current fiscal compared to average rate of completion of over 1% in the recent past.
Data shows projects worth Rs 326 billion were completed during the quarter ended September 2020 while projects worth Rs 240 billion were completed in the June 2020 quarter. “This is precipitously low compared to average project completion at Rs.1.3 trillion per quarter in 2019-20 and Rs.1.6 trillion per quarter in 2018-19.
“Private sector projects could take much longer to revert to aggressive completion of projects. While the logistical reasons for slowing down of the project completions may be getting over, the problem of depleted demand will linger and will remain a hindrance to project completions,” CMIE said in its weekly analysis.
CMIE is of the view that given the prolonged lockdown and continued uncertainties regarding a return to some form of normalcy, Indian enterprise is not expected to enthusiastically complete capacity-expansion investment projects they had initiated in the past.
Initially, in April and May, the lockdown froze implementation of projects by a diktat. Then disruption of labour made it difficult for enterprises to undertake project implementation activities. And finally, uncertainties about a revival have slowed down project completions, it said, forecasting that the lingering uncertainties about a revival in demand will continue to inflict delays in project completion schedules.