Demonetisation: Sharp fall in new project investments

New investments worth Rs 2,097 crore were announced, on an average, per day during the 39 pre-demonetisation days from October 1 through November 8.

By: ENS Economic Bureau | New Delhi | Published: January 5, 2017 1:35 am
Demonetisation, note ban, money ban, CMIE, investment projects, cash crunch, investment, investment proposal, indian express news, economy Cash crunch seems to have taken a heavy toll as only 177 investment proposals worth Rs 43,700 crore were made between November 9 and December 31, 2016.

Demonetisation has hit the pace of announcement of new investment proposals during the quarter ended December 2016. New investment proposals worth Rs 125,000 crore were observed during the quarter ended December 2016 as against Rs 236,000 crore per quarter on average in the preceding nine quarters of the Modi government, the Centre for Monitoring Indian Economy (CMIE) has said.

New investments worth Rs 2,097 crore were announced, on an average, per day during the 39 pre-demonetisation days from October 1 through November 8. “This average dropped sharply by 61 per cent to Rs 824 crore during the post-demonetisation period. The number of projects announced per day dropped from 6 to 3 by a similar comparison,” CMIE said.

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Cash crunch seems to have taken a heavy toll as only 177 investment proposals worth Rs 43,700 crore were made between November 9 and December 31, 2016. On the other hand, 227 new investment proposals worth Rs 81,800 crore were announced during this quarter till November 8. “The fall in investment proposals becomes more apparent when we adjust these values for the number of days in each period. The quarter consisted of 39 days before demonetisation and 53 days, after. Evidently, the quarter had more days in the post-demonetisation period and yet, the investments during this period was lesser than in the shorter pre-demonetisation period,” Mahesh Vyas of CMIE said.

If the pre-demonetisation rate of new investment proposals had continued during the post-demonetisation period, the quarter could have ended with new investment proposals worth Rs 189,000 crore. “This would still be lower than in the preceding quarter (Rs 194,000 crore) or the average new investment proposals worth Rs 236,000 crore since the establishment of the Modi government,” CMIE said.

Demonetisation has further slowed down new investment pace. The slowdown in new proposals is stark in terms of the number of new proposals. Only 404 new investment proposals were observed during the quarter ended December 2016.

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