Know what may mar Modi’s ease of doing business pitch

Know what may mar Modi’s ease of doing business pitchContrary to the claim of PM Narendra Modi Government of good days is the number of stalled and abandoned projects.

As per the data by Centre for Monitoring Indian Economy (CMIE), the number of stalled and abandoned projects in India increased in the first 10 months of the Bharatiya Janata Party (BJP)-led government.

The CMIE quarterly data, which is exclusively with Economic Times, is used by the finance ministry as a gauge of industry confidence. It showed that 363 projects were stalled in the fiscal year ended March 31, 2015, as compared to 341 projects in 2013-14. The same trend was visible for abandoned projects.

While Congress-led Government’s last financial year 2013-14 saw 69 projects being abandoned, the number increased to 101 on BJP's watch. But the comparison is not exact as the BJP government was not in power for the whole of fiscal 2014-15, having assumed office on May 26 last year.

ET reported that the concern is that the number of abandoned projects increased steadily through 2014-15 as in the quarter ending June 30, 2014, just after the new government assumed power, the number was an all-time low of 11.


In the second quarter it more than doubled, with 30 projects being abandoned. The fiscal year, however, ended with 32 projects - the highest in eight quarters - being abandoned.

"The number of projects getting stalled has increased. Apart from the numbers, equally important is the nature of projects. The data shows that large projects have continued to remain stalled. The reason is that there were expectations but nothing has changed in terms of economic environment for business," Mahesh Vyas, Managing Director, CMIE told ET.

Vyas added that the corporate profitability had declined sharply as the industry was postponing execution of larger projects, thinking why spend now when you can spend later.

Projects are stalled due to lack of regulatory clearances, financing hurdles and unfavourable market conditions. As per the monitoring agency, the abandoned projects are stalled projects where the promoters have quit.

ET reported that there was a silver lining for the new government when it came to number of projects revived, which increased from 119 in 2013-14 fiscal to 161 in 2014-15. This number was the highest in the quarter ending September 30, 2014 at 49.

“When the new government took over, the industry thought clearances would be quicker and there would be some changes. So with such expectations, industry starts reviving smaller projects. At the end of the fiscal, some amount of uncertainty over energy - gas and coal - has also gone. The gas prices have increased and the
Supreme Court has given a go-ahead for coal block auctions. So these projects are reviving. But the overall stalling rate continues to increase," Vyas told the financial daily.

(Image: Reuters)