India’s economic recovery remains shaky: ICRA

The Dollar Business Bureau

The Cabinet Committee on Investment (CCI) has resolved 332 projects worth Rs. 11.5 trillion by mid-December 2015, largely concentrated in steel, power and road sectors

  The recovery in Indian economic activity remains tentative and narrowly focused in sectors such as roads, railways, power transmission and passenger vehicles, credit rating agency ICRA said in its latest report. The value of new projects announced during the second quarter of this fiscal was at Rs.3.3 trillion and these projects were mainly related to machinery, electricity, chemical, transport equipment and services sectors. The report underlined that despite positive consumer sentiment, the country’s capacity expansion will fail to keep pace with project announcements. “Availability of budgetary outlays for financing of infrastructure may emerge as a constraint to the pace of execution in the financial year 2017,” ICRA said. Pointing out the recent clearances facilitated by the Cabinet Committee on Investment (CCI), the credit rating agency said the revised projects value during the second quarter in 2015-16 was a meager Rs.0.1 trillion. And the decline in commodity prices and lower input costs for firms will be insufficient to revive investment plans. The spike in new project announcements during the July-September period this year benefitted from agreements signed during the Tamil Nadu Global Investors Meet. “With several states planning such meets, project announcements may remain high,” the report stated. The Cabinet Committee on Investment has resolved 332 projects worth Rs.11.5 trillion by mid-December 2015, largely concentrated in steel, power and road sectors. The report, however, stressed that global over-capacity in the steel sector, muted prices, considerable imports despite imposition of safeguard and other duties are likely to have a negative impact on the industry. Referring to India’s current economic scenario in terms of merchandise exports – which have been on a declining trend for the 12^th straight month in November – the ICRA said, “Contraction in merchandise exports on account of factors such as weak global demand, low prices of commodity-intensive exports and lack of competitiveness engendered by stronger INR on an REER basis, remains a key drag on overall economic activity.”  

December 30, 2015  | 03:35pm IST