This study covers 253 corporate projects assisted by term-lending institutions and commercial banks, during 2002-03 and their aggregate cost amounted to Rs.18,736 crore, spread over nine year period spanning 1998- 99 to 2006-07. In 2001-02, 210 projects were covered and had an aggregate cost of projects at Rs.24,656 crore (Table 2). The normal capital expenditure of the 253 projects amounted to Rs.83 crore phased out over the period of five years from 2002-03 to 2006- 07. The total fixed capital expenditure of these projects amounted to Rs.18,819 crore. The phasing details of the projects sanctioned during 2002-03, showed that 36.9 per cent of the total fixed capital expenditure amounting to Rs. 6,953 crore was planned to be incurred in the year of sanction and another 35.0 per cent (Rs.6,595 crore) in the following year 2003-04. The share of capital expenditure in the year preceding the year of sanction was very small at 3.6 per cent; the phasing pattern of these projects, in this respect, is somewhat different from that of the projects sanctioned assistance in 2001-02.

The industrial classification of projects adopted for this study is based on the industrial activity as indicated in the project reports. Infrastructure projects accounted for a substantial share of 55.3 per cent in the aggregate cost of projects in 2002-03; the share was higher when compared with that of 43.0 per cent in 2001-02 (Table 3). The share of telecom sector halved to 10.6 per cent in 2002- 03, compared with 21.4 per cent in 2001-02, whereas that of roads, ports, storage and rail

line sector increased to 19.8 per cent in 2002- 03 from 14.6 per cent in the previous year. Power sector projects had a significantly higher share at 24.9 per cent as against 7.0 per cent observed in 2001-02. The share of engineering industry in the aggregate cost of projects substantially declined to 2.9 per cent in 2002-03 from 25.9 per cent in 2001-02. Project cost of the chemical industry accounted for 5.8 per cent of the aggregate cost of projects in 2002-03 (3.9 per cent in 2001-02). The three major industry groups, viz. , infrastructure, engineering and chemicals together accounted for 64.0 per cent of the total cost of projects in 2002-03 as compared with 72.8 per cent in

the previous year. Other industries, which accounted for 2 per cent to 8 per cent of the total cost of the projects in 2002-03, were services (hospitals, transport and others) (7.5 per cent), textiles (6.0 per cent), construction (4.2 per cent), information technology (2.8 per cent), hotels & restaurants (2.7 per cent), food products (2.5 per cent) and cement (2.2 per cent).

Very large projects, each with a project cost of Rs.100 crore and above, numbering 38 accounted for 68.1 per cent of the total cost of projects in 2002-03 (Table 4). The aggregate cost of these projects worked out to Rs.12,767 crore. In 2001-02, 43 such projects (aggregate cost of Rs. 20,497 crore) accounted for 83.1 per cent of total cost of all projects.

The state-wise classification of projects is based on the location of the projects as stated in the project reports. There were 4 projects that are located in more than one state (presented in the category multi-state projects), accounting for less than one per cent of the aggregate project cost in 2002-03; in 2001-02, the share of such projects was very high at 22.4 per cent (Table 5). Statewise, Delhi occupied the top position with an aggregate cost of projects at Rs. 4,736 crore accounting for 25.3 per cent of the total cost of projects in 2002-03 followed by Maharashtra (14.6 per cent), Andhra Pradesh (10.3 per cent), Karnataka (8.1 per cent), West Bengal (7.8 percent) and Gujarat (7.3 per cent) (Chart 2).

TABLE 5 : STATE-WISE DISTRIBUTION OF PROJECTS AND THEIR COST, 2001-02 AND 2002-03

New projects, numbering 114, with a total cost of projects at Rs.10,487 crore, accounted for 56.0 per cent of the aggregate cost of projects in 2002-03 as against 74 such projects with a share of 59.8 per cent in 2001-02 (Chart 3). The share of 72 projects for expansion (Rs.2,960 crore) was at 15.8 per cent in 2002- 03 as compared with 66 such projects accountingfor 18.9 per cent in the previous year.

The Indian economy performed well in 2002-03, although significantly lower than expected. The Electricity Bill, 2003, which seeks to delicense power generation and to permit captive power plants, was approved by Parliament in 2003. In the telecommunications sector, policies for opening up of international long-distance telephony, setting up Universal

Service Obligation, permitting a fourth operator in the cellular mobile segment and commissioning of internet backbone were put in place. In the road sector, private parties were allowed to apply for tenders either singly or through a consortium restricted to four members. The Ministry of Road and Surface Transport has short-listed 23 build, operate and transfer (BOT) projects under this new bidding process. The impact of these initiatives was visible in projects sanctioned assistance in 2002-03, as 22 projects with a share of 19.8 per cent of the aggregate cost of all projects were from roads, ports, storage and rail lines segment. Though such positive signals were able to arrest the fall in corporate investment in the year 2002-03, they could not revert the downtrend. The fall in capital expenditure to the extent of 9.1 per cent in 2002-03 was much lower than the fall of 23.6 per cent in 2001-02. Moreover, big projects whose phasing generally results in sizeable capital expenditure in the years succeeding the year of sanction, were very few in 2001-02 and 2002-03. Further, the total project expenditure of all the projects sanctioned assistance in 2002-03 amounted to Rs.18,819 crore as against Rs.25,149 crore sanctioned in 2001-02. Accordingly, the total capital expenditure expected in 2002-03 including that of projects sanctioned assistance in all the prior years, amounts to Rs.37,154 crore, indicating a decline over that in the previous year.

The year 2003-04 has, so far, been very encouraging with good monsoon brightening the prospects for agriculture. The industrial growth has also been very good mainly due to the strong rise in manufacturing output. The outlook for the industrial sector is expected to be strengthened by renewal of agricultural activity. This is further supported by the low interest regime and improved all round corporate profitability. As an effect of all these positive signals, business confidence has been very optimistic. However, due to the lack of large projects in the last two years, the investment planned for 2003-04 based on projects, which have been sanctioned financial assistance in the years prior to 2003-04, amounted to just Rs.19,518 crore. To work out the aggregate capital expenditure in 2003-04, we must add to this the capital expenditure in 2003-04 on projects sanctioned assistance in that year. Therefore, if the aggregate capital expenditure in 2003-04 has to show growth over that in 2002-03 (i.e. Rs.37,154 crore), the capital expenditure in 2003-04 on projects likely to be sanctioned in 2003-04 must be above Rs.17,636 crore. Although, the climate for fixed capital investment appears to be conducive and also the business confidence is positive, such a high amount of investment in 2003-04 on new projects sanctioned assistance seems to be very unlikely. Thus the year 2003-04 may also witness a fall in corporate investment when compared to that in 2002-03.