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New projects worth Rs 4.6 lakh crore herald economic revival

HYDERABAD: In what could be seen as signs of economic revival, new projects worth over Rs 4.6 lakh crore were initiated as on December 2019, shows data released by the Centre for Monitoring Indian Economy on Wednesday. According to the CMIE data, new projects worth Rs 1 lakh crore were undertaken during the last quarter alone, a 37.4 per cent increase year on year.

While there was an increase in new projects, the proportion of stalled projects fell by a massive 81.8 per cent to Rs 0.58 lakh crore.

The rise in new projects was notwithstanding the declining capacity utilisation, which, according to data from the RBI, stood at 68.9 per cent in the September quarter. It was at 73.6 per cent a year before.

However, the quantum of completed projects remained flat at Rs 1.36 lakh crore as on December 2019 as against Rs 1.37 lakh crore in December 2018.

Meanwhile, the Centre’s infrastructure push with its Rs 102 lakh crore investment pipeline stretching for over five years is expected to revive industrial demand, though analysts believe the availability of funds may be a key limiting factor for such an ambitious plan.

“The major constraints faced are availability of funds for financing large projects, lengthy processes in land acquisition and payment of compensation, environmental concerns, time and cost overruns due to delays in project implementation, procedural delays and lesser traffic growth than expected, increasing the riskiness of the projects resulting in stalled or languishing projects and shortfall in funds for maintenance,” said the task force report on Tuesday.

According to Motilal Oswal, key reforms such as collaborations and joint ventures with global infrastructure developers, and adoption of international contract standards are essential to make the proposed plan successful.

“Sanctity and enforcement of contracts, tapping financing channels including credit enhancement fund for infrastructure sector, strengthening the municipal bond market, faster asset monetisation, deepening IDF markets and developing asset-backed securitisation market… The task force recommends regulatory revamp to enable significant participation of FPIs and the inflow of FDI into IDFs and DFIs,” it noted.