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D. Sampathkumar

Chennai, Aug. 17 The number of projects initiated in 2007-08, by the private corporate sector for implementation, in key sectors such as petroleum, sugar, textiles etc. is sharply down as against the previous year, a study by the Reserve Bank of India (RBI) reveals.

In its latest monthly bulletin (August 2008), the RBI says that as against 258 projects expected to cost around Rs 26,000 crore taken up in 2006-07, the number has come down to 128 with the projected investment pegged at Rs 10,700 crore.

Ironically, the development comes in the face of textile enterprises seeing a slight improvement in export prospects with problems plaguing the Chinese industry and units in other countries with which India competes in the global markets, as this paper reported in its edition dated August 17, 2008.

It is a similar tale in other sectors as well with both the number and project costs scaled down sharply. However, metals and hotel industries have shown buoyancy. (See Table).

The waning corporate interest in committing fresh investments is evident from another piece of statistics published by the RBI for 2007-08.

Such investments overall, which have shown a consistent rising trend in recent years, is flat for the first time in the year just gone by compared to the immediate previous year.

From a figure of close to Rs 73,000 crore in 2003-04, the projected fresh investments in 2006-07 had gone up nearly four fold at Rs 2,83,440 crore. But the subsequent year sees the private corporate sector investing only Rs 2,84,371 crore - a clear decline in real terms if inflation is taken into account over the project implementation period (See Table).

Another worrisome feature evident from the RBI data is that the entrepreneurial base is also shrinking with fewer new projects being taken up, but involving bigger-ticket investments to make up the higher value. For instance, it took roughly 1,054 new projects to notch up a figure of Rs 2,83,440 crore in 2006-07.

But nearly the same project size ( Rs 2,84,371 crore) was reached with nearly 150 fewer projects (910, to be exact) in 2007-08.

As the RBI data make it clear, the private corporate sector’s overwhelming focus on infrastructure projects such power, telecom, ports, airports, roads etc. while boosting up the numbers simultaneously masks the declining business fundamentals in others sectors where fewer projects are coming up.

Indeed, infrastructure which accounted for only a third of new projects in 2005-06 now constitutes close to half the value of fresh investments committed by the private sector.

Of particular interest is the growth in the number and project values of Special Economic Zones (SEZs) and IT parks which have seen a ten-fold increase in the value of investments. Promoters have clearly been able to persuade financial institutions to discount political risks while backing these projects.

More Stories on : Economy | New Projects | RBI & Other Central Banks

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