Mumbai: Even as economists maintain that a recovery in the private sector investment cycle is key to sustainable growth, new data from the Centre for Monitoring Indian Economy Pvt. Ltd (CMIE) shows that the value of stalled infrastructure projects in the quarter ended September increased to Rs13.22 trillion. The number increased for the fifth straight quarter and accounts more than 13% of total projects under implementation.

The private sector accounts for more than two-thirds of the value of these stalled infrastructure projects. The percentage share of the value of stalled private sector projects is the highest since March 2004. This value has been more than 20% for four straight quarters. There has been a marginal decline in this share in the government sector.

Lack of environmental clearances, fuel and raw material problems and lack of funds are responsible for Rs4.94 trillion worth of stalled projects. This is almost 40% of the value of total stalled projects.

Power projects continue to dominate stalled projects. A total of 39.04% of the total stalled projects was in the electricity sector by value. This is similar to what was seen in the previous quarter. Manufacturing units stalling saw an increase to 25.59% by value, from 23.4% earlier.

Such high levels of stalled projects have had an adverse impact on new project announcements. The value of new private sector project announcements in the quarter ended September was Rs31,000 crore. This value was Rs1.79 trillion and Rs1.69 trillion in the quarters ended September 2016 and 2015.

Such a sharp decline in new project announcements in the private sector has brought the value of total new project announcements to its lowest since the Narendra Modi government assumed office.

Key new project announcements include the Vedanta group’s Rs7,927.04 crore aluminium smelter expansion project in Korba, Chhattisgarh. Aluminium prices were rising during the quarter. This followed China’s decision to cut down on its domestic aluminium production. This helps producers elsewhere in the world.

Another new project was JSW Energy Ltd’s electric car, battery manufacturing and charging stations project. The Rs4,000 crore project is located in Surendranagar, Gujarat. The government has been pushing electric vehicles with the vision of an all-electric car fleet by 2030.

Sector-wise, non-financial services saw the largest value of new project announcements in the last quarter.

The continuous increase in the share of stalled projects comes in the wake of a slowdown in economic growth. To be sure, the situation was not particularly good even before the disruptions caused by demonetisation and the Goods and Services Tax.

Revival of stalled projects is crucial for sustained economic recovery. The situation demands going beyond the clichéd idea that what the Indian economy needs right now is just a fiscal stimulus.

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