Industrial Growth In Line, Demand Still The Key Concern: Anand Rathi

At 1.9% in Mar'22, India recorded in-line industry growth, Anand Rathi has said in a report. Primary goods and infra did relatively better, capital goods turned marginally positive and consumption - both staples and durables - contracted. In Mar'22 manufacturing production is back to Mar'19 levels, which is at odds with 50% jump in sales by listed corporates and 40% jump in GST collection vs. pre-pandemic levels. Here are excerpts from the Anand Rathi report.

Moderate growth

At 1.9%, industrial growth in Mar'22 was in line with expectation. With an unfavourable base since Sep'21, industrial growth came off in H2 FY22. But for cap goods, durables and staples, all other categories reached record high production in Mar'22. At the overall level, however, manufacturing production just equaled the Mar'19 production level.

Three lost years for manufacturing

11.7% manufacturing and 11.3% growth in industry during FY22, came against 9.6% and 8.5% contractions respectively, in FY21. Unchanged manufacturing production level in Mar'22 vs. Mar'19 suggest manufacturing is just reaching the pre-pandemic high. Capital goods production is still down 16% vs. previous high (Mar'18) and staples down 8% (vs. Dec'18) and durables 6% (vs. Oct'18). With better performances by mining and electricity, industrial production was 1.9% above the previous high (Mar'21).

Demand still the key concern, buts signs of disconnect

Consumption is well below the pre-pandemic high. Capital goods is even worse. Domestic demand (as exports are doing much better) seems to be the key concern. Yet, buoyant sales growth of listed companies (~50% above pre-pandemic) and GST collection raise doubts about whether the ground situation of Indian industry is as bleak as the IIP data suggest.

High inflation, rate hikes complicate the situation

In the run-up to the eight-year high retail inflation data released today, the RBI has already started raising the policy rates and this is likely to continue. The higher cost of fund can further depress industrial production