Just a few months ago Indian economy was in shambles – unemployment was at its peak, reverse migration of migrant workers was in full flow and closed factories, mounting death toll due to COVID-19 with no signs of it abating and above all tensions on border – all had made even a diehard optimist sceptical about future prospects. Economists around the world had almost written off the economy which was, not too in distant past, one of the fastest growing economies around the world.
But since last few weeks tables seemed to have turned for the economy – now even some of the worst pessimists have started making positive noises! Automobile manufacturers are hoping for record sales in this festive season. Other industries, especially in building materials are seeing their production touching almost pre-COVID levels. Migrant workers are slowly returning to cities as they are seeing better job opportunities there. And as a matter of coincidence COVID death tolls are coming down drastically and also there are talks about the chances of getting COVID vaccines much earlier than expected.
Banks see good disbursements
Indeed, there are other evidences too that suggest things are changing for better. For example, see what ICICI Bank has to say “Post the easing of restrictions, there has been a substantial month-on-month increase in disbursements across retail products. Mortgage disbursements during Q2-2021 crossed pre-Covid levels and reached an all-time monthly high in September 2020. Auto loan disbursements have continued to increase from June 2020 and have reached pre-Covid levels in September 2020 reflecting the rise in passenger car sales. Disbursements across the rural portfolio have crossed pre-Covid levels in the months of August and September 2020. Credit card spends recovered to about 85% of pre-Covid levels in September 2020 led by increased spends in categories such as health & wellness, electronics and e-commerce.”
Rural demand resilient
Most of the businessmen attribute the faster than expected recovery to resilient rural economy which has seen lesser fatalities and also minimum impact of lockdown. “Over 50% of the rural districts have shown a growth over their past few performances. The impact of COVID-19 has been lesser in rural markets as compared to Tier-1 markets. Districts having rural demand of 25% impacted as compared to 50% in urban areas. Farmer welfare expenditure is up, nearly 100%. Other rural industries are also generating a good growth like fertilizers, seeds, etc. Both state and central government are increasing their focus, allocation and release of funds on rural housing. MSPs have been increased. Second consecutive good monsoon this year,” says Atul Daga, Executive Director and CFO of UltraTech Cement Ltd. According to him, good Monsoon is helping the rural market to grow.
Cement manufacturers seeing greenshoots
Some leading cement manufacturers give clear picture about the demand scenario – Gujarat, which was amongst the bottom few states in terms of demand, has also started showing signs of recovery towards the end of second quarter. Maharashtra is still to pick up, though the large projects like coastal roads, Metro, Mumbai Airport extension and Expressways are there to give project based push to demand. Eastern and Central markets have literally brushed aside the COVID impact and moving ahead with solid demand. North markets have started picking up largely, driven more by infra projects by the government in the road project, except the NCR markets where housing market has started picking up. South looks promising with Andhra getting into good demand from the state capital cities and the irrigation projects. And the remaining South states also, that is, Tamil Nadu and Karnataka, are starting to see positive movement in demand.
Some are however cautious
However, Bharat Puri, Managing Director, Pidilite Industries Ltd is more cautious than others. “While we are seeing signs of input costs hardening, we remain cautiously optimistic on steadily improving demand recovery,” he says.
Some economists also caution the optimists saying it’s too early to jump into any conclusion as some issues remain still unaddressed. Among them major one being unemployment which is still at levels that make many economists uncomfortable. MSME sector is also in a bad shape and its recovery is of utmost importance for the economy to register a sustained recovery. Further, banks are seeing growth in credit in retail segment with project investment (by private sector) not making much headway. Pick up in project investment is essential to create jobs. Also, there is hanging sword of uncertainty in the form of possible second wave of COVID-19 which if materialises may puncture the growth story abruptly. As put by Gandharv Tongia, CFO, Polycab India Ltd “we have kicked off the new quarter on a positive note. As of now, we are witnessing healthy growth in all segments despite the fact that we have a strong base of last year. Having said that, it is also worthy to note how many developed countries are witnessing a second wave of contagion and lockdowns. Hence, we will remain cautious and adopt a well-calibrated approach to ever-evolving dynamics of the market.”