Project Cost Index inches up for second month in June

-Dr M.S.Kapadia

Giving hopes of some revival in project execution, composite project cost index as measured by ERIL Index of Cost of Project Inputs inched up for the second month in June, after a decline in April, but a gradual rise in earlier nine months. Also, the final combined project outlay indices, made available after two months of provisional estimates, have tended to be higher (relative to provisional numbers). The y-o-y increase in the project cost index worked out to 2.4 per cent in June, against 0.4 per cent over corresponding period a year ago. Production of capital goods was up by 9 per cent in April-May, against 2 per cent decline in the year ago period. Production of cement increased 7.7 per cent during April-May, twice the measure a year ago. Alloy, non-alloy steel output has however stagnated (16 per cent increase a year ago). The WPI for manufactured products, which conceptually set the stage for project investment, increased annually 3.6 per cent in June, against around 2.8 per cent a year ago. Computed by Economic Research India Pvt. Ltd., the ERIL Index measures project cost escalation in terms of WPI of material inputs relevant in project construction

Trends in June

The aggregate wholesale price index (WPI) for non-metallic mineral products declined by 0.5 per cent during June due to 4 per cent decline in price of marbles and polished granite and one per cent in grey cement. However, the price of bricks & tiles moved up one per cent.

The combined WPI for basic metals, alloys & metal products rose 0.1 per cent due to higher price of steel (4 per cent), ferro manganese (3 per cent) and ferro chrome, sheets, joist & beams, iron & steel wire, wire rods, angles, aluminium and steel castings (1 per cent each). However, the price of melting scrap declined 2 per cent and silver and gold & gold ornaments 1 per cent each.

The total WPI for machinery & machine tools increased 0.4 per cent due to higher price of computers (6 per cent), sprinkler (5 per cent), ball/roller bearing, fans and PVC insulated cable (4 per cent each), grinding /wet coffee machinery and harvester (2 per cent each) and fibre optic cable and boiler & accessories (1 per cent each). However, the price of insulators (2%) and batteries, electric switch gears and electrical pumps declined one per cent.

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