MOSL: CAPITAL GOODS | CAPEX TRACKER-New project announcements decline sharply in 3QFY18-Stalled projects remain elevated

​CAPITAL GOODS | CAPEX TRACKER: New project announcements decline sharply in 3QFY18; Stalled projects remain elevated

We highlight key takeaways from the quarterly projects data released by Centre for Monitoring Indian Economy (CMIE). We use this as a proxy for the Indian capex cycle. CMIE tracks projects across stages of announcement, implementation and completion, and takes into account stalled/shelved projects.

New project announcements dip 67% to INR768b; 6th quarter of decline

New project announcements stood at INR768b in 3QFY18, a dip of 67% YoY and the lowest since June 2004. Private sector projects fell to their lowest since June 2003 to INR355b (down 71% YoY) and accounted for 46% of total new projects. The share of central governments was 84%. State government projects stood at INR59b (down 66% YoY). A sectorial analysis of proposals during the quarter indicates steep declines in Electricity (-48% YoY; INR115b), Transport Services (-35% YoY; INR343b) and Manufacturing (-68% YoY; INR217b). New project proposals declined sharply during 9MFY18 as well – during this period, 1,721 projects with investments worth INR4t were announced as against 2,517 projects with investments worth INR9.2t announced in 9MFY17.

Project completions drop 19% YoY to INR769b; 4th quarter of decline

During the quarter, project completions declined 19% YoY to INR769b – this is much lower than the average run rate of INR1t, and in fact, the lowest in three years. Project completions have declined on a YoY basis for the last four quarters post structural reforms like demonetization and GST (renegotiation of contracts). Project completions should pick up going ahead, as business activity normalizes post GST implementation.