Unfavourable market conditions and delayed investments in the last few years have resulted in an “alarmingly high rate” of increase in stalled projects, which stood at a staggering Rs 8.8 lakh crore as on December end, the Economic Survey 2014-15 said.
However, the stock of stalled projects plateaued in the last three quarters to 7% of GDP at the end of December 2014 from 8.3% last year.
“... manufacturing dominates in total value of stalled projects even over infrastructure. The government’s stalled projects are predominantly in infrastructure.
“Unfavourable market conditions (and not regulatory clearances) are stalling a large number of projects in the private sector and in contrast, regulatory reasons explain bulk of stalling in the public sector” it added.
Manufacturing sector was stifled by a general deterioration in the macroeconomic environment, while electricity projects are victims of lack of coal.
Out of the total Rs 8.8 lakh crore worth of stalled projects, public and private sector accounted for Rs 1.8 lakh crore and Rs 7 lakh crore, respectively.
“Clearing the top 100 stalled projects will address 83% of the problem of stalled projects by value,” it added.
“At the end of the third quarter of the current financial year, for every 100 rupees of projects under implementation, 10.3 rupees worth of projects were stalled and the number of private sector stood at 16,” it said.
The stalled projects, affecting the balance sheets of companies and public sector banks, are actually constraining future private investment, thereby “completing a vicious circle”.
However, despite this, equity markets seem to be performing quite well, suggesting that the “stalling of the projects is indeed not having a significant impact on firm equity”.
“Efforts must be made to revitalise public-private partnership model of investment,” it added.