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Analysts at Standard Chartered point out that India’s Capex data published by the Centre for Monitoring Indian Economy (CMIE) for Q3-FY20 (ended December 2019) shows a sequential improvement in most investment variables after two quarters of sharp declines.

Key Quotes

A few large projects drove the improvement; we believe sustainability is key. New project announcements jumped nearly threefold on a q/q basis due to a large aircraft procurement announcement. However, even after adjusting for this one-off factor, new announcements were up 30% q/q, led by the private sector. Project completions nearly doubled q/q, driven by two large private-sector project completions in the steel and housing sectors. Projects under implementation remained stable, with a marginal increase in private projects.”

“Stalled projects stabilised at 6.4% of GDP (INR 13.3tn) in Q3-FY20; financing constraints have been the key reason for stalled investments since March 2018. This reflects the ongoing financing challenges facing India’s non-banking financial companies (NBFCs) and the rest of the financial sector.”

“Going forward, we will look for the improvement in capex to be sustained before concluding that a firm investment recovery is underway. We expect a slow recovery as challenges in the financial sector are resolved only gradually.”