The adoption of GST and insolvency act, relaxation in FDI rules and other reforms initiated by the current government will make India more attractive destination for investment. Further, states are vying with each other to improve their positions in “Ease of Doing Business” annual rankings.
On the external front, global economies are on revival mode. Hence, the World Bank estimates global GDP to grow at three percent in 2017 and 3.1 percent in 2018. Based on recent improvements in the IIP and GDP rates the World Bank expects Indian economy to grow at 7.3 percent in 2018-19.
Roadways, airports and other infrastructure projects are picking pace. This augurs well for the cement and steel sectors. After good monsoon, demand from rural India is expected to increase for consumer durables and automobiles.
While the above factors indicate growth momentum in new projex in the near future, low capacity utilisation and heavy debt still act as barriers in taking up new project proposals. Further, major players in the steel and cement sectors are eyeing stressed capacities currently up for grabs in the NCLT. It is only after the current consolidation phase is over, we can expect fresh projex from them.
Banks, one of the major sources of project financing, are going through a very difficult phase; hence, financing of ongoing and new projects will be a challenging proposition for them at least for next one year or so.
Under such circumstances, the budget-funded, government-sponsored projects, which were keeping the momentum of projex cycle, will continue to play a dominant role in the next couple of years.
Private companies, whose sales and profits are showing signs of uptick, are expected to come back to the projex arena in the second or third quarter of the current fiscal.