Investments in December quarter dive to more than a decade low on concerns of bad debt, 2019 general election

Investments in October-December quarter dipped to 14-year low raising concerns about the chances of an economic turnaround, according to the database of the Centre for Monitoring Indian Economy (CMIE), said media report.

The plunge in the investments is mainly attributed to concerns of rising bad debt and policy confusion ahead of the general elections in 2019.

Domestic firms announced new projects worth Rs 1 lakh crore in the December quarter, 53 percent lower than what was declared during the September quarter, and 55 percent lower than in the same period the previous year, said a report by Mint.

New private sector projects fell 62 percent in the just-ended December quarter compared with the September quarter, and 64 percent compared with the December quarter of FY18. New public sector projects also declined compared with the September quarter of FY19, said the report.

A CRISIL report early in October 2018 had pointed out that the share of private investments in the infrastructure sector had fallen to a decadal low of around 25 percent in FY18 steeply down from a high of 37 percent in FY08.

Private investments, which averaged 37 percent between fiscals 2008 and 2013, fell by 600 basis points (bps) between fiscals 2013 and 2017 to 31 percent, which fell a steep 600 bps further to 25 percent in FY18, as a plethora of stalled projects and stressed assets dampened investor interest and risk appetite.

“A material ramp-up in government spending in the past few years has meant the share of private investments in infrastructure has fallen to a decadal low of around 25 percent in FY18,” according to a CRISIL InfraIndex.

This means that between fiscals 2008 and 2018, there was a massive plunge of 1200 bps in private investments.

While the highways sector has seen a revival in public-private partnerships (PPPs), and the renewables sector some buoyancy, private investments in other infrastructure segments have remained stagnant or weak, the report said.

“Resumption and broad-basing of private investments are critical to sustain the share of infrastructure investments at around 6 per cent of GDP over a medium-to-long-term,” CRISIL managing director Ashu Suyash said in the report.

Late in October 2018, NITI Aayog CEO Amitabh Kant had pitched for channelling insurance and pension funds for financing infrastructure projects as also for a complete re-examination of the Viability Gap Funding (VGF) scheme.

Infrastructure sector has suffered in India due to under-investment for a long time, he said.

“We need to build up an environment to tap pension and insurance funds for investments in infrastructure projects…VGF scheme needs a complete re-examination,” Kant had said at CRISIL India Infrastructure Conclave.

— With PTI inputs