As a result, if Indian companies have one more reason to defer expansion plans - in addition to problems in acquiring land, permissions, money or inputs - it is lack of demand.

True, Indian companies' capacity expansion plans do not match those of ArcelorMittal's - the world's largest steel maker is believed to be pulling back from its eight-year $35-billion expansion plan. But projects planned and under execution over the past couple of years are estimated at $1.5 trillion (around Rs 72 lakh crore).

Some of that now looks to be in jeopardy. Few companies are admitting this publicly, but JSW Steel [Get Quote], for instance, has pared investment in West Bengal to Rs 4,000 crore (Rs 40 billion) from Rs 10,000 crore (Rs 100 billion). Also, as Seshagiri Rao, finance director, said: "We are six months ahead of schedule for the expansion from 7 million tonne to 10 million tonne at Vijayanagar, but we intend to stay with the original deadline of September 2010.

That is hardly surprising when JSW is not confident of running even a 7 million tonne plant at full capacity and has yet to start production at the new lines. In fact, it has cut production by 20 per cent.

Down south, Venu Srinivasan, chairman & managing director, TVS [Get Quote] Motors, was forthright when he said last week that TVS would be scaling back capital expenditure this year from the planned Rs 100 crore (Rs 1 billion) to Rs 40 crore (Rs 400 million).

The Tata Motors [Get Quote] management was more guarded when it said  recently that it would review capital expenditure plans and may scale back capacity expansion. Last week,  the company lowered commercial vehicle production targets at three of its plants.

Tata Steel [Get Quote], however, is expected to go ahead with the plant at Kalinganagar, where it is setting up a 6 million tonne facility. And Vinod Dasari, COO at Ashok Leyland [Get Quote], confirmed that the 50,000 unit commercial vehicle plant in Uttarakhand will be up and running by  March 2010.

According to Mahesh Vyas, MD and CEO at CMIE: "Projects that have taken off and nearing completion are unlikely to be stalled. However, those that are still on the drawing board could be put on the backburner given the uncertainty about the state of the financial crisis." Vyas added that so far only a couple of smaller projects that had been announced have been shelved.

But with debt turning expensive, even some on-going projects could be delayed. Reliance Industries [Get Quote] is believed to be taking it easy with the Special Economic Zone(SEZ)  in Haryana because it anticipates less demand for such space.

Cautious about order inflows into engineering firms from the industrial sector and private sector projects that have yet to achieve financial closure, an HSBC report noted that  "projects where solid progress has not been made run the risk of getting delayed".  Already, the sequential rise in the order books for a set of engineering companies was just  7 per cent in the September 2008 quarter over the June quarter  though on a y-o-y basis, order inflows were up a strong 40 per cent.

However, Subir Gokarn, chief economist at S&P, Asia Pacific, pointed out that the machinery and equipment segment of the IIP has been slowing for about a year now. "Some amount of the slowdown in capital expenditure, we believe, would have happened even without  the tight liquidity current situation," he said, adding, "However, now that the recovery could take longer  than anticipated, more projects can be expected to be pulled back."