Indian economy losing steam, feel mavens
Bankers have often flung numbers relating to a huge investment pipeline to underscore their point that the growth engine is still humming. Biz week in pics
By ET Bureau |
MUMBAI: Top Indian bankers have often flung numbers relating to a huge investment pipeline at carping critics to underscore their point that the growth engine is still humming.
However, some of the exuberance on display is open to question going by recent data on project investments. According to the latest report of the Centre For Monitoring Indian Economy (CMIE), the number of projects that have been abandoned or shelved has risen to 39 in the quarter ended March 31, 2008.
The investment projected for the projects was Rs 17,896 crore. The figure is higher compared to a year ago when 16 projects of Rs 10,695-crore value were shelved. The details of the shelved projects are not available.
The number of completed projects during the period have also slipped. The CMIE report shows that only 64 projects aggregating Rs 13,456 crore were completed at the end of the last quarter of 2007-08, compared to 184 projects entailing an investment of Rs 45,925 crore during the same period a year ago. This could well reinforce the growing view that corporate India is headed for a sharp slowdown after five years of runaway growth.
However, some of the exuberance on display is open to question going by recent data on project investments. According to the latest report of the Centre For Monitoring Indian Economy (CMIE), the number of projects that have been abandoned or shelved has risen to 39 in the quarter ended March 31, 2008.
The investment projected for the projects was Rs 17,896 crore. The figure is higher compared to a year ago when 16 projects of Rs 10,695-crore value were shelved. The details of the shelved projects are not available.
The number of completed projects during the period have also slipped. The CMIE report shows that only 64 projects aggregating Rs 13,456 crore were completed at the end of the last quarter of 2007-08, compared to 184 projects entailing an investment of Rs 45,925 crore during the same period a year ago. This could well reinforce the growing view that corporate India is headed for a sharp slowdown after five years of runaway growth.
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Over the last four years, the economy has grown at an average of well over 8% annually. However, with global economic growth threatening to decelerate in the wake of a combination of factors such as the impact of the credit market turmoil, surging crude prices and the inflationary pressures which it has fanned, India is no exception. Many economic forecasters have projected that economic growth will nudge down to below 8% this fiscal although the government and the central bank still maintain it will exceed the estimates.
Economists concede the worry lines exist. According to Tata group chief economic adviser Sidhartha Roy, a rise in interest rates does impact the index of industrial production. ���The growth in capital goods has slowed down to 6.5% in April-May 2008 from 16.9% last year. This is worrying. If you look at import of capital goods other than telecom, they have come down,��� he said. Mr Roy said that sometimes, projects do not take off for a variety of reasons. For example, in case of a large project, land acquisition may be a stumbling block. Availability of power too could be an issue.
In absolute terms, however, banks are seeing a better loan demand from corporates this year. ���Investments in projects that have started would continue as the projects need to be completed. But new projects need rethinking. If one wants to raise funds, most of the borrowings have to be leveraged through debt, and the borrowing cost through the capital market route is not attractive,��� Mr Roy said.
Aditya Birla Group chief economist Ajit Ranade said GDP growth is expected to slow down by 1%. However, considering the farm sector is expected to accelerate, the slowdown would be pronounced in industry and services.
���The industrial output is expected to slow down by 1-1.5% on account of higher energy costs, input costs, interest costs and a slowdown in the global economy. What we are seeing is export tightening. Therefore, though input costs are rising, the output prices are are not increasing much, being absorbed by the industry,��� Mr Ranade said.
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