What policy paralysis? Projects got stuck during UPA due to poor market, not Land Bill

This bit of news is likely to add more fuel to the ongoing heated debate surrounding the proposed amendments to the Land Acquisition Bill.

An RTI query has revealed that the UPA’s Land Acquisition Bill was not, after all, the reason for stalling of projects in the last few years, a report in The Economic Times today has said.

According to the report based on the RTI query, of the total projects stalled only 8 percent was because of land acquisition troubles. The RTI query by Venkatesh Nayak revealed that as of February there were 804 stalled projects. Of this, the maximum number of projects - 97- got stalled due to unfavourable market conditions. As many as 95 did not take off due to lack of clearances (not related to environment issues), 94 because of lack of promoter interest and 84 on lack of funds.

Only 66 projects were stalled because of land acquisition troubles, that too they were not related to economically weaker sections of the society.

As many as 37 projects were stalled due to fuel/feedstock/raw material problems. The number of projects that were stuck due to environmental clearances was a lowly 34.

The data bring out the real reason behind the corporates’ reluctance to invest - it is just unfavourable market conditions not the so-called ‘policy paralysis’. One has to remember that the global economy was going through a rough patch during the last five years, when there has been an alraming increase in the stalled projects.

However, the business community kept complaining about the policy pralysis of the UPA government, which went into the defensive due to various scams that propped up during its second term.

The BJP, meanwhile, made the most of situation during the elections.

The party attacked the Congress and the UPA for crippling the country’s economic growth and strangling investments by devising laws like the Land Bill. A promise was made to the business community and the people of the country that everything will be repaired once Narendra Modi becomes the prime minister.

Modi has been lucky enough to be the prime minister at a time when the global situation, especially the crude oil price, has turned favourable. This has helped the government take a few reform steps.

Despite all these, India Inc continues to be reluctant to make investments as is evident from the data in the Advance Estimates of National Income & Expenditure data released on 9 February 2015. According to the document released by the government, gross fixed capital formation (constant prices) is unlikely to see any major improvement in 2014-15, the year when Modi came to power.

Capital formation, in accounting terms, is the investments made “to add capital stock such as equipment, buildings and intermediate goods”. According to Investopedia, “the higher the capital formation, the faster the economy can grow.

At Rs 29,62,726 crore in 2012-13, the capital formation witnessed a decline of 0.3 percent over the year earlier. In 2013-14, the trend reversed and the investment saw a 3 percent growth to Rs 30,50,236 crore. In 2014-15, the capital formation is likely to have risen just 4.1 percent to Rs 31,76,067 crore, the govenrment estimates say.

Companies are still sitting tight on their cash hoard as they are not yet sure of the economic recovery.

Interestingly, many corporate honchos have even started complaining about the slow movement of reforms under the Modi government.

Will NDA too find itself in UPA’s shoes in one or two years’ time? One cannot rule out such an eventuality completely.

Read the entire ET story here .

Data by Kishor Kadam