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MOSL: CAPITAL GOODS-New project announcements down sharply to 14-year low

Capital Goods: New project announcements down sharply to 14-year low; Weakness witnessed across segments

 

We highlight key takeaways from the capex data released by the Centre for Monitoring Indian Economy (CMIE), which we use as a proxy for the Indian capex cycle. The CMIE tracks projects across various stages of announcements, implementations and completions, and takes into account stalled/shelved projects.

New project announcements decline sharply to 14-year low

• New project announcements declined sharply by 55% YoY to INR1.0t in 3QFY19, impacted by weakness across segments barring construction and real estate (supported by the low base of 3QFY18). Rising policy uncertainties ahead of the general elections and current liquidity tightness prevailing in the economy have also added to the turmoil. While manufacturing declined 62% YoY (INR333b) and services declined 72% YoY (INR243b), construction and real estate projects increased 288% YoY (INR242b) supported by a weak base in 3QFY18.
• Key new projects announced during the quarter were mainly from the state governments, which include (a) the Taloja affordable housing project (worth INR180b) from the Maharashtra state government, (b) the Rayapudi government office complex (INR35b), and (c) the Mahipalpur bypass –NH8 from the Delhi state government (INR20b).
• Private sector project announcements declined 64% YoY to INR497b in the quarter. Private sector projects accounted for 50% of the new projects announced in 3QFY19. Government project announcements dropped 41% YoY to INR506b (central government projects contributed 26%, the lowest contribution in the last 23 years; balance was contributed by state and local governments) in 3QFY19.