Sharp fall in sales growth
In the last article, we saw the falling rate of growth in production of the core infrastructure sectors. The growth in production has been falling in coal, steel, cement, and electricity. We will now analyze sales growth in these sectors. The chart below shows the sales growth rate in the current fiscal year as compared to the growth rate in fiscal 2Q15. The Indian fiscal year is from April to March.
Stalled projects are the key reason
The sales growth in three major sectors, electricity, cement, and iron and steel, has fallen sharply in the first two quarters of fiscal 2016. Sales have fallen mainly due to stalled projects in various infrastructure-related sectors. As of December 15, 2015, there were 65 stalled projects in the power sector. These stalled projects cost over 2,500 billion rupees ($37.9 billion). In the coal sector, there were 13 stalled projects costing over 300 billion rupees ($4.5 billion). The number of stalled projects in roads and highways were 34, and cost over 500 billion rupees ($7.6 billion). In railways, the number of stalled projects is 84, which amounts to over 900 billion rupees. The data regarding the stalled projects is from the Government of India’s Ministry of Statistics and Programme Implementation’s report.
India-focused mutual funds
In the current year, the Franklin India Growth Fund (FIGZX) gave a return of negative 6% on a YTD (year-to-date) basis as of December 22, 2015. ICICI Bank (IBN), Infosys (INFY), Wipro Technologies (WIT), and Tata Motors (TTM) form a part of the India-focused funds’ portfolios.
In the next article, we will analyze operating income in the Indian infrastructure sector.