That the economy is on a steep slide because of the drying up of investments is clear from the fact that corporates have shelved projects worth a whopping Rs 1.8 trillion (Rs 1.8 lakh crore) in the April-August period, according to the Centre for Monitoring Indian Economy (CMIE).
Significantly, this is not due to high interest rates, as is being claimed by every industry lobby, but mostly on account of delays in getting land and environmental clearances among others.
Project shelving, which has been on the rise for the past 18 months, had peaked at Rs 4.5 trillion last fiscal, CMIE said.
The prime reason behind shelving of projects was problems being encountered in land acquisition, securing environmental clearances, local unrest, lack of availability of fuel or raw materials, particularly the mined ones such as coal and iron ore, it added.
A few promoters have cited inadequate availability of cheap funds and poor demand also as reasons for aborting projects, according to the independent economic think tank.
“We expect project shelving to remain high or rise even further in the coming months. A huge pipeline of projects has got built up in the past few years because of the rush among companies to announce new projects since the capex boom began in 2004-05,” CMIE said.
Outstanding investment rose six times since the beginning of 2005-06 and stood at Rs 141.8 trillion by the end of June 2012.
In a capex cycle, as more and more investments get announced, promoters of all projects in their initial stages re-assess their projects in the light of increased competition and the relatively weaker projects get shelved.
The CMIE data shows that the large and capital-intensive industries have seen huge capacity additions in the past few years. And their capacity utilisation has fallen as the demand has not grown at the same pace.