{"id":33876,"date":"2018-10-30T14:47:31","date_gmt":"2018-10-30T09:17:31","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=33876"},"modified":"2018-10-30T14:47:31","modified_gmt":"2018-10-30T09:17:31","slug":"india-inc-whos-growing-whos-slowing","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/india-inc-whos-growing-whos-slowing\/","title":{"rendered":"India Inc: who\u2019s growing, who\u2019s slowing"},"content":{"rendered":"<p><a href=\"http:\/\/www.thehindu.com\/business\/Economy\/india-inc-whos-growing-whos-slowing\/article20556714.ece\"><span style=\"font-weight: 400;\">India Inc: who\u2019s growing, who\u2019s slowing<\/span><\/a><\/p>\n<p><b>Context<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Have demonetization and the rocky transition to GST brought Indian businesses to a grinding halt.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Ever since the Central Statistics Office (CSO) released its GDP estimates for the April-June 2017 quarter, pegging growth at 5.7%, there has been a heated debate on the implementation of demonetization and GST.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Over 1015 companies filed their results for the last six quarters beginning April-June 2016 and ending July-September 2017. <\/span><i><span style=\"font-weight: 400;\">Studying their sales growth patterns threw up these findings<\/span><\/i><span style=\"font-weight: 400;\">.<\/span><\/li>\n<\/ul>\n<p><b>Consumption revives<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The note ban delivered a severe blow to consumer confidence.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Almost every consumer-facing sector saw a sharp dip in sales for the October-December 2016 quarter \u2014 the months when the note ban was in force.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Most sectors charted a quick recovery from that blow. Some have even seen growth rates return to levels better than a year earlier.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Aggregate sales growth for Fast Moving Consumer Goods (FMCG) companies slumped from 6.5% in July-September 2016 to 2.9% in the demonetization quarter.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Automobile sales shifted into first gear from 13.2% growth in July-September 2016 to 4.2% in the October-December quarter.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Sales for retailers fell off a precipice from a 31% growth to a measly 1%. Consumer durable sales, already sluggish before demonetization grew at just 3.5% in the note ban quarter.<\/span><\/li>\n<\/ul>\n<p><b>The bounce &#8211; back<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">All of these sectors experienced an unexpectedly quick bounce-back from the note ban. FMCGs saw growth pick up to 9.6% in the January-March 2017 quarter itself.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Consumer durables saw sales growth zooming to 13% in the quarter immediately following demonetization, further accelerating to 20% and 16% in the subsequent quarters.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Even paints, a discretionary purchase item, saw a doubling of growth in January-March 2017 from the note ban trough.<\/span><\/li>\n<\/ul>\n<p><b>The GST roll-out impact<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The GST roll-out didn\u2019t pose as much of a challenge for the listed firms. Consumer goods such as FMCG, apparel and automobiles saw a blip in April-June 2017, but were back on the fast track by July-September 2017.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">In fact, listed firms in FMCGs, paints, durables, apparel and automobiles have all demonstrated their strongest growth in the last two years in the latest July-September quarter.<\/span><\/li>\n<\/ul>\n<p><b>Impact on services lags goods<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><b>Consumer services<\/b><span style=\"font-weight: 400;\">, however, had experienced a different outcome. Revenue growth for telecom, entertainment, hospitality, and media took a sharp knock in the quarter in which demonetization occurred.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Telecom services went from 7.1% growth in July-September 2016 to a 1.7% contraction in October-December 2016.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Entertainment (multiplexes, cable TV providers) saw a halving of growth from 14% to 7% and media firms\u2019 (newspapers, broadcasters, television channels) slowed sharply from 9.2% to 1.2%.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Growth in these sectors has continued to be feeble through 2017, with the GST transition probably playing a role in unresponsive sales.<\/span><\/li>\n<\/ul>\n<p><b>Why have consumer goods taken less of a hit from GST than consumer services?<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">GST tax structure has reduced the indirect tax burden on most consumer goods, fitting them into lower rate slabs than before but it has raised effective taxes on services.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Consumer goods firms have therefore been able to use the savings from GST to entice consumers back with discounts and lower selling prices. But service providers, who are already victims of intense competition in their sectors, haven\u2019t had this luxury.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Commentary from most consumer goods firms suggests an improvement in volume growth in the latest quarter. In the case of services such as telecom or hotels, competition has lowered tariffs.<\/span><\/li>\n<\/ul>\n<p><b>Impact on Capital goods \u2014 divided<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The investment leg of the economy did not fare well. Revenue numbers for turnkey infrastructure developers, construction firms and real estate developers were already shrinking in the quarter prior to the note ban (July-September 2016).<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">After the note ban, they experienced an inconsistent recovery over the next two quarters to hit a growth patch by April-June 2017. But the latest July-September 2017 quarter has seen them back in the despair.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">These firms received some order flows from the Government splurge on roads, railways, rural electrification and the Bharatnet this fiscal. But the flows have dried up lately as the Centre has tightened its purse strings.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Private sector capital expenditure continues to recede.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">However, not all capital goods makers struggled with poor order flows, those that cater to consumer firms managed business-as-usual.<\/span><\/li>\n<li style=\"font-weight: 400;\"><b>Auto components, cables and telecom equipment<\/b><span style=\"font-weight: 400;\"> have seen a steady improvement in growth rates through the three quarters of 2017, ending the July-September quarter with growth of 14%, 33% and 14% respectively. These firms seem to have benefitted from the <\/span><b>trickle-down effect<\/b><span style=\"font-weight: 400;\"> of demand revival in their user industries.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The sectors such as steel, cement, mining, metals and refineries showed a strong hold.<\/span><\/li>\n<\/ul>\n<p><b>Impact on Export-oriented sectors<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Jewellery, software and pharmaceuticals displayed declining growth in the first three quarters of 2017. Textiles and shipping shrank last year and managed a mild revival this year.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">GST apart, sector-specific issues have also played villain to some <\/span><b>export-oriented sectors.<\/b><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">For <\/span><b>software services<\/b><span style=\"font-weight: 400;\">, the backlash against offshoring and changing business models has posed a challenge.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">For pharmaceutical exporters, pricing pressure on generics in the U.S. market and regulatory crackdowns has hit growth.<\/span><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>India Inc: who\u2019s growing, who\u2019s slowing Context Have demonetization and the rocky transition to GST brought Indian businesses to a grinding halt. Ever since the Central Statistics Office (CSO) released its GDP estimates for the April-June 2017 quarter, pegging growth at 5.7%, there has been a heated debate on the implementation of demonetization and GST.&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/india-inc-whos-growing-whos-slowing\/\">Continue reading <span class=\"screen-reader-text\">India Inc: who\u2019s growing, who\u2019s slowing<\/span><\/a><\/p>\n","protected":false},"author":61,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[555],"tags":[],"class_list":["post-33876","post","type-post","status-publish","format-standard","hentry","category-test-1","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1704889892},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/33876","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/61"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=33876"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/33876\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=33876"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=33876"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=33876"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}