India: Outlook stays subdued on external risks – Standard Chartered

Standard Chartered Bank economists Saurav Anand and Anubhuti Sahay highlight a sharp slowdown in India’s new investment announcements in March, heavily affected by the Middle East conflict and sector-specific issues in renewable electricity and chemicals. Projects under implementation (PUI) were distorted by technical reclassification, while project completions surged to their second-highest level ever. The overall investment outlook is seen as subdued given external sector uncertainty and demand risks.

Middle East shock and sectoral softness

"The Middle East conflict impacted new investment plans more than existing investment. The conflict soured sentiment, with new announcements plunging 90% y/y in March."

"However, not all of the decline in new announcements was due to the Middle East war. While the decline in new announcements in March is understandable, it was significantly weak in February as well, primarily led by renewable electricity generation and the chemical sector."

"Given that renewable electricity generation and the chemical sector are usually important contributors to new project announcements (40% of new announcements in the quarter of March 2025 came from these sectors), the softness in these sectors led to one of the weakest new announcements for the March quarter (contracted 57% y/y); this was the weakest March quarter for new announcements since 2021, when it was impacted by COVID."

"Will slower new announcements impact future PUI? While such a possibility cannot be ruled out, the correlation between new announcements and implementation is not very strong, especially for the March quarter, as large announcements are typically made during investment summits."

"Key positive during the quarter was a pick-up in the pace of project completions. Project completions in the March quarter were the second-highest quarterly total ever, surpassed only by the pre-election quarter of March 2024."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)