Credit rating agency, ICRA in its report on Indian economy, has said that the recovery in Indian economic activity remains tentative and narrowly focused in sectors such as roads, railways, power transmission and passenger vehicles. The report further stated that the consumption boost from the Seventh Pay Commission award is unlikely to lead to an immediate investment in capacity expansion, as utilization is still low at 71.5% in first quarter of current fiscal though up marginally from 70.2% in the corresponding quarter last fiscal.
The rating agency also expects the fiscal situation to weigh on project execution. The review estimates project completion declined by 4.8% on an annual basis to Rs 60,000 crore in Q2FY16 while the value of revived projects was much lower at Rs 10,000 crore. In the second quarter of financial year 2015-16 the new project announcements rose by 5.9% from a year ago. The Rs 3.3 lakh crore new projects announced in the quarter were concentrated in machinery, electricity, chemical products, transport equipment & services. Led by metals & metal products and power projects, substantial Rs 0.8 trillion worth of projects reportedly stalled in the second quarter of FY16, continuing to outpace value of revived projects.
The report said that the improvement of the Discoms' financial health would take place with a lag, which would continue to subdue growth of power offtake. Besides, the report highlighted that 'Availability of budgetary outlays for financing of infrastructure may emerge as a constraint to the pace of execution in FY17.'