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Is this a sign of economic revival?
Thu, 16 Apr Pre-Open

Stalled projects have become one of the biggest banes of the Indian economy over last few years. But if recent economic indicators are anything to go by, a recovery in Indian economy seems to be happening. It is a known fact that during the preceding slowdown a lot of projects were stalled for the lack of proper policies, bureaucratic hassles and other such issues. However, things are improving on this front.

As reported in Mint, the stalled projects as a percentage of GDP are declining since last few quarters. Their proportion has come down to 6.8% in March 2014 from 7.1% in December 2014 quarter. However, it is still not clear whether any major projects were scrapped during March quarter. It is noteworthy that projects worth Rs 730 bn were scrapped during December quarter.

A slew of policy reforms and government actions seem to have shown some positive sign. The government is also taking active steps and has put various projects on fast track. It is imperative to note that, during December 2014, around 33% of the leading 100 projects by value were stuck due to land acquisition problems. However, this has now come down to 27%. While land acquisition and related issues still remain the top reasons for the delay, the other issues like environmental clearances; supply bottlenecks etc continue to hamper the project clearance.

While the data lends some credence to the recovery story, it is yet to get support of the banking credit growth. Clearing of these stalled projects will also add some fillip to banking sector, which has already been overburdened with bad loans. This in turn will encourage investment cycle. While revival in projects is a positive development, we hope this is a sustainable trend and not just a dead cat bounce.

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