FY 2017 will be the worst year for investments in India: CMIE

The Centre for Monitoring Indian Economy (CMIE), the country's top independent consultant, has said that the fiscal 2017-18 “is likely to go down as the worst possible year for investments in India", predicting, "New investment proposals are likely to stabilise around Rs 8 trillion in 2017-18, which would be about 60 per cent of the new proposals made during 2016-17 and would be the lowest level since 2004-05."

Coming against the backdrop of the Government of India basking in the glory over "rise" in Gross Domestic Product (GDP) in the last quarter from 5.7% to 6.3%, the CMIE's fresh analysis, based on the data it has collected, says, “This would be the third consecutive year of a fall in new investments since they spiked momentarily in 2014-15. The difference is that the fall in 2017-18 would be sharper than in earlier years."

The CMIE further says, “Revival of projects that were shelved or abandoned earlier would likely add up to about ₹1.2 trillion in 2017-18. This would be half of the revivals in 2016-17. Nevertheless, they assume greater importance now than ever before in the light of the fall in new investment proposals."

The CMIE continues, "Revived projects would account for nearly 15 per cent of new proposals in 2017-18. In 2016-17, they were 18 per cent of the value of all new projects. Till 2012-13, they were less than 10 per cent of new proposals". It adds, "Total investments made during the entire implementation of projects that would be completed during 2017-18 are likely to add up to a ₹4 trillion. This is much smaller compared to ₹6.3 trillion in 2016-17 and Rs 5.8 trillion in 2015-16."

Pointing out that the sum of ₹4 trillion is "very small compared to the Rs 11 trillion worth of completions that were initially supposed to be commissioned during the year", the CMIE reveal, "Companies kept delaying their completion dates, and as a result, the estimates of completions during 2017-18 came down progressively during the year to Rs 9 trillion and then to Rs 7 trillion."

The analysis, by Mahesh Vyas is Managing Director and CEO of the CMIE, says, "The value of projects that get stalled, abandoned or shelved increased during 2017-18. In the first three quarters these added up to Rs 3.9 trillion which is the same as it was in the entire fiscal 2016-17." It adds, they are "slated to increase" to about Rs 6 trillion in fiscal 2017-18.

Noting that "another Rs 5.9 trillion worth of projects were dropped because of lack of any information on them for a very long time", the CMIE says, "Thus, the total attrition during the first three quarters was investments worth Rs 9.9 trillion", which could "cross Rs 14 trillion" in fiscal 2017-18.

In fact, according to the CMIE, "The ratio of projects attrition to accretion, i.e the ratio of projects stalled or dropped to the addition of projects because of new announcements or revival of old ones, is expected to rise sharply during 2017-18", adding, "Attrition would exceed accretions by over 50%... In the past, attrition of investments has never exceeded accretions."

Admitting that the "CMIE is somewhat conservative in announcing that a project is stalled", the analysis says, "Compared to the investments stalled, a much larger value of outstanding investments sits under the header 'Projects with no information, but live'. These amounted to ₹15.8 trillion as of the end of December 2017 compared to accretions that amounted to ₹9.9 trillion during the first three quarters ended December 2017."

Even while saying that “the pipeline of investments may quite big at ₹182 trillion”, the CMIE does not fail to point out that “this pipeline hasn’t grown. It has, in fact, shrunk from its peak of ₹185 trillion as of March 2017. Half of these outstanding projects have moved beyond the stage of mere announcements..."