Govt’s infra push drives up project tenders in Q3

Rising spending on productive assets such as roads, ports and factories support economic growth but the slow pace of growth in the December quarter indicates that recovery may still be on shaky ground and state governments have not fully recovered from the economic disruption caused by the pandemic.
In the public sector, major areas of new spending were roads, water supply, community services, and irrigation
In the public sector, major areas of new spending were roads, water supply, community services, and irrigation
Updated on Jan 20, 2021 06:10 AM IST
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ByTanya Thomas, Mumbai

Announcements of new capital expenditure plans, a key measure of government and private spending in capacity building, continued to grow in the December quarter after grinding to a near halt at the beginning of the fiscal year.

New project spending announced in the December quarter rose by 10.29% from the preceding three months, according to data from Projects Today, which monitors the activity. In all, 2,085 new projects, entailing a total investment of Rs.2.76 lakh crore, were announced in the fiscal third quarter. Total investment had doubled sequentially in the second quarter, albeit on a smaller base.

Rising spending on productive assets such as roads, ports and factories support economic growth but the slow pace of growth in the December quarter indicates that the recovery may still be on shaky ground and that state governments have not fully recovered from the economic disruption caused by the pandemic. Declining tax collections have crimped their ability to spend more.

In the public sector, major areas of new spending were roads, water supply, community services, and irrigation while the private sector stepped up investments in drugs and pharmaceuticals, metals, electronics and automobiles.

The private sector accounted for 711 new projects, entailing a total investment of Rs.1.36 lakh crore, a 36.5% rise from the preceding three months. On the other hand, government-sponsored project expenditure plans fell in the third quarter, declining 7.21% from Q2. Private foreign investment in capital goods fell 34% as well.

State governments which account for more than half of all government-funded capital expenditure in the country have had to resort to deep spending cuts this fiscal to redirect resources towards fighting the pandemic. The Centre has stepped up efforts to fill in some of this vacuum, but faced with the prospect of fiscal deficit widening to 7.5-8% this year, its firepower is also limited.

“For sure, there’s an uptick on the number of projects being announced,” said Sandeep Gulati, managing director, Egis India, an engineering firm.

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Tuesday, January 25, 2022