New project investments slow down in Q1 of FY11

Indicating a subdued start to the current fiscal, investment in fresh projects dropped by over Rs 50,000 crore to Rs 1,47,457 crore in the April-June quarter of 2010-11 over the previous quarter.

As per a survey by online database Projects Today, slowdown was seen in new project investments in the first quarter of FY 2010-11, mainly due to higher costs of fuel and non-food manufactured products, delays in government approval and lack of any big ticket projects.

A total of 2,293 new projects entailing an investment of Rs 1,47,457 crore were announced in the April-June period, compared to 2,431 new projects worth Rs 2,01,671 crore in the January-March quarter of 2009-10.

"High inflation mainly in fuel and non-food manufactured items and clearer signs of RBI exiting expansionary monetary policy, that is likely to lead to rise in lending rates, along with delays in projects clearance by the government may have caused the slowdown in fresh private sector investment plans in the first quarter of FY11," the report stated.

The aggregate figures revealed slowdown in announcement of fresh investment proposals by both the public sector as well as the private sector.

"Lack of big ticket projects in the private sector dragged down the fresh investment figures despite increase in the number of startups," the report stated.

Private sector saw announcement of only 35 mega projects worth Rs 84,987 crore in the first quarter of FY11 against 41 mega projects worth Rs 1,16,919 crore proposed in Q4 of FY10.

The public sector saw 1,300 new project announcements worth Rs 44,682 crore in the first quarter compared to 1,554 projects entailing Rs 67,899 crore in Q4 of last fiscal.

The manufacturing sector, despite attracting 111 more projects, saw fresh investments decline sharply by 41.5 per cent on quarter-on-quarter basis.

The sharp increases seen in the fresh investments in the preceding two quarters (Q3 & Q4 of FY10) was mainly because of large projects proposed in the steel and cement sectors.

"With most of these projects still in the planning stage, it is natural for the quarter (Q1 FY11) to see some slack particularly in large outlay project startups," the survey stated.

Reflecting subdued activities after traditionally hectic fourth quarter of a fiscal, the first quarter of this year also saw fewer project completions and more projects were put on hold for the time being.