Despite efforts taken by Narendra Modi government, project delays continue to rise

ET INTELLIGENCE GROUP: Data compiled by the ministry of statistics appears to challenge the widely-shared perception that project clearances have been quicker under the Modi government.
In fact, according to official data, the proportion of delayed projects dropped sharply in FY14, only to increase again in the subsequent months.

s on March 20, 2015, data on projects worth Rs 1,000 crore or more reveals that the absolute number of delayed projects continued to increase from the year-ago level despite the present government’s efforts to speed up project clearances.

The numbers are based on the latest monthly data on domestic projects released by the ministry of statistics and programme implementation (MOSPI).

The data reveals that the total number of ongoing projects, each worth Rs 150 crore or more, increased to 749 in FY14 from 587 in FY13, whereas the proportion of delayed projects fell to 34.1% (or one-third) from 54.9% (or half).

However, the share of delayed projects rose again to 43.2% in October 2014, with 747 total ongoing projects.

The numbers may also question the validity of the improvement seen during FY14.

According to some economists, the sharp improvement in FY14, as shown by the MOSPI data, is in contrast with economic indicators like gross capital formation and the IIP which languished to decade-low levels.

“The numbers don’t gel well with the policy logjam witnessed during the period. The improvement showed by the data in delayed projects paints a dramatically opposite picture compared with the sluggish manufacturing activity and a collapse in investments,” said Devendra Kumar Pant, chief economist and head of public finance, India Ratings and Research. According to the Central Statistical Organisation, the ministry of finance, and the planning commission, the industry growth was just 1% in FY13 and 0.4% in FY14 based on the revised and advance estimates.

Public consumption fell to a seven-year low of 3.8% in FY14. “Capital formation in the economy has suffered due to lack of investments. This is not captured by the trend in the projects data for FY14,” said Madan Sabnavis, chief economist, CARE Ratings.

Gross fixed capital formation failed to grow in FY14 for the first time in 13 years. The capital formation, as a percentage of GDP, dropped to 31.4% in FY14, the lowest since FY04 when it was 28.7%. A sluggish investment cycle also impacted bank loan growth which slipped to 14% in FY13 and 15% in FY14 from 17-22% in the previous five years.