Investments in the Indian economy have hit a 14-year low in the quarter ending December, making it harder for the Modi government to fight elections on the plank of performance.
There is bad news for the Modi government on the economic front as the new year sets in. Investments in India have dropped to a 14-year low in the quarter ending December 2018 according to data from the project-tracking database of the Centre for Monitoring Indian Economy (CMIE).
New projects by Indian companies aggregated to Rs 1 trillion in the quarter ending December 2018, a decline of 53% q-o-q and a fall of 55% y-o-y.
Private sector projects showed a pretty steep decline of 62% q-o-q and 64% y-o-y. Even public sector project announcements declined by 37% on q-o-q basis and 41% on y-o-y basis.
All the major sectors saw a drop, except for the construction sector, which was also marginal and on a low base. Some of the major factors impacting investor sentiment are policy uncertainty due to upcoming elections, persistent bad debt issues and weak progress in terms of stalled projects.
CMIE data indicates that the value of stalled projects has slightly increased in Q3, 2018-19, and the rate of stalling is still the same – calculated as a percentage of the total projects under implementation. The rate is close to a record 24% for the private sector. In fact the public sector is showing some improvement in stalling rates, bringing the overall stalling rate to 11%.
The worst hit in terms of stalling are the power and manufacturing sectors, accounting for 35.4% and 29.2% of stalled projects respectively. The major causes of stalling are lack of funds, issues with supply of fuel and raw material, and unfavourable conditions in the market. But lack of funds is emerging as the major cause, suggesting stress in the banks as well as the corporate sector.
Congress President Rahul Gandhi taunted the PM on the numbers in a tweet, asking if he could get his mouthpiece ‘Jetley’ to spin this.
Modi ji this is looking very bad. Can you please get your mouthpiece, Jetley, to spin this?https://t.co/IA5VeFmAXU
— Rahul Gandhi (@RahulGandhi) January 3, 2019
Obviously, the trend does not bode well for the Modi government, more so when expected populist measures in the coming months have made investors even more cautious. Growth in farm loan waivers is already leading to cuts in capex spending by state governments.
Add to that the anger from the youth on unemployment and farmers, is Modi in need of a doosara OR is he ready to lose elections2019 ?