Booster dose

Mumbai, April 10: Government activities have energised capital goods, which grew 10.4 per cent in February.

This is at a time when the global financial crisis has ravaged the Indian economy, which is experiencing a prolonged slowdown, with industry contracting 1.2 per cent in February.

Analysts said the slowdown had not stopped the PSUs from executing their plans; they have not cancelled or deferred their projects.

In addition to PSUs, there has been a strong demand for capital goods from power firms, which again is the outcome of government spending on equipment.

“For companies in power transmission and distribution, orders are picking up as the tendering activity for Power Grid Corporation (a PSU) orders gathers pace,” says Pulkit Bakliwal, an analyst at Sharekhan.

Bakliwal said the activity in power had risen because of government spending and this should benefit firms associated with power generation, transmission and distribution.

He expects Bharat Heavy Electricals Ltd (Bhel) and Crompton Greaves to gain from increased activity in power.

Puneet Bambha, analyst at Angel Broking, said firms with government contracts were better off since they ran a lower risk of cancellation.

Bhel is upbeat on orders from power firms. In the last fiscal, orders from power firms were Rs 44,407 crore against total orders of Rs 59,687 crore, which is about 74 per cent.

At a recent conference call, senior executives said they had orders for around 80,000MW in the Eleventh Five Year Plan (2007-12).

Even for projects meant for the Twelfth Five-Year Plan, the company has received orders.

The management expects orders of 95,000-100,000MW in the Twelfth Plan, comprising 70,000MW in thermal, 20,000MW in hydel and 8,000MW in nuclear power.

Stimulus impact

The government’s fiscal measures will show results from April-May onwards, said Pronab Sen, chief statistician to the government.

Sen attributed the fall in industrial production in February largely to fall in the sales of consumer non-durable goods, particularly sugar. He said tax cuts had much quicker effects, but expenditure measures took some time to produce results.