MOSL: CAPITAL GOODS-New project announcements decline sharply-Private sector investment proposals at 15-quarter low

​CAPITAL GOODS: New project announcements decline sharply; Private sector investment proposals at 15-quarter low

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 64% to INR845b

Intentions to set up new projects were at INR845b in 2QFY18, a dip of 64% YoY and the lowest since June 2014, when the new Modi-led government assumed power. Private sector investment proposals fell to their lowest in 15 quarters to INR313b (down 83% YoY) and accounted for 37% of total new project proposals. The share of government proposals was at 63% and stood at INR532b (down 9% YoY) – of this, the share of state governments was 44%. State government investment proposals stood at INR367b (up 68% YoY), primarily driven by the proposed INR200b Taj International Airport project in Greater Noida. Uttar Pradesh accounts for 24% of the new investment proposals during the quarter.

Our interactions with companies indicate that post GST implementation from July 01, 2017, government ordering has slowed, as the new GST rates are getting integrated into new and existing contracts. Government orders should improve in the coming quarters, as this impact fades. A sectoral analysis of proposals during the quarter indicates steep declines in Electricity (-73% YoY; INR60b), Transport (-51% YoY; INR328b) and Manufacturing (-76% YoY; INR303b).