India: CMIE: Expecting a pick-up in project completions

  • Projects set up to create new productive capacities worth INR846bn were completed in 3Q21. This compares well with the record on this count in recent quarters.
  • For example, it compares well with the INR710bn worth of completions accomplished in the preceding quarter. It is also better than the average INR777bn worth of investments commissioned in the preceding five quarters.
  • The INR846bn is the first release of the estimate of project completions in 3Q21. This will be revised upwards continuously as new information becomes available through the next few months.
  • While completions in 3Q21 compare well with the record of the recent past, completions are still very low compared to their levels before the pandemic and they are also low compared to expectations.
  • Total investments in the first two quarters of 2021-22 add up to a meagre INR1.55tr. In comparison, before the pandemic, completions during two consecutive quarters averaged INR2.8tr. Therefore, project completions have still not recovered to their pre-pandemic levels.
  • The completion record continues to disappoint. For example, projects worth INR2tr were expected to be completed in 2Q21. These expectations are based largely on statements made by promoters or implementers of the expected completion date of their projects.
  • This was the expectation in Mar 21. Now, by the end of Sep 21 we see completions reaching only INR700bn. Further, expectations have narrowed down to only about a trillion rupees worth of projects being completed in that quarter.
  • The expectation was that projects worth INR1.9tr would be completed in 3Q21. But in reality only INR0.85tr were completed. Further, now the expectation for this quarter has been scaled down. We expect only INR1.5tr worth of projects to have been completed in 3Q21.
  • Available data suggest that projects worth INR2.61tr would be completed in 4Q21 and another INR2.37tr worth of projects would be completed in 1Q22. Project completions could reach INR7.5tr in 2021-22.
  • We believe that time overruns could continue and the final completion of projects in 2021-22 would be less than INR6tr. Project completions have never crossed INR6.5tr, not even during the last upturn in the capex cycle.
  • Completion of investment projects had ramped up well in 2015-16 to reach INR5.91tr and then they peaked at INR6.53tr in 2016-17. But, they could not rise beyond this level. Completions fell to INR4.84tr in 2017-18 and could recover only up to INR6.47tr in 2018-19.
  • A completion of projects anywhere close to INR6tr would still be much better than the INR3.1tr worth of completions seen in 2020-21 or the INR5tr recorded in 2019-20. But, it would be less than the achievements in 2016-17 and 2018-19. We will keep a close watch on the developments.

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