Britannia Industries reported a 23.23% surge in consolidated net profit for the 30 September 2020 quarter. Colgate saw a 26.6% rise in EBITDA, with a 540 basis point surge in margins, to 31.8%. Cement major ACC saw operating EBITDA rise by 20.47% to Rs 671 crore in the September quarter, with EBITDA margin up by 328 basis points at 19%. Cement behemoth Ultratech also reported a 113% surge in consolidated profit, 30% rise in EBITDA and a 480 basis point jump in margins to 26.6%. Overcoming the challenges posed by the Covid-19 pandemic and lockdown, ICICI Bank posted a 549% jump in net profit at Rs 4,251 crore for the September quarter, with mortgage disbursements at record levels and credit card spends at 85% of pre-Covid levels. India’s largest private sector bank, HDFC Bank, also saw a good 18.4% rise in profit, driven by a solid 15.8% rise in loan growth, with total loan book at a whopping Rs 10.38 lakh crore for the September quarter.
What these numbers from cement, fast moving consumer goods (FMCG) and the banking sectors indicate is that economic momentum has been gaining rapid traction in the last 3 months under the aegis of the Narendra Modi-led government. Of course, there are Doubting Thomases like Rajiv Bajaj, who has failed to deliver shareholder wealth and instead of improving Bajaj Auto’s market share—that is a lowly 18.69% in the motorcycle segment, compared to arch rival Hero Moto Corp, that has a solid market share of 35.9%—can be seen giving lame interviews to television channels, playing victim and blaming just about everyone but himself for losing out to Hero, which is now ruling the roost.
The economic recovery is in large part being led by the rural sector, vindicated by the fact that most of the aforesaid companies derive well over 40-50% of their sales from rural and semi-urban areas. More than Rs 22,000 crore were given to over 9 crore farmers during the lockdown under the PM-KISAN scheme via direct benefit transfer (DBT) and over Rs 75,000 crore were given by way of MSP purchases. Loans worth Rs 4.2 lakh crore were also disbursed at concessional rates to over 3 crore farmers, showcasing how the Modi government has boosted rural spending.
While the agrarian economy did the heavy lifting, India’s economy picked up speed in September also because of the revival in demand and business activity. Five of the eight high-frequency indicators, including exports, tracked by Bloomberg News, improved in September, while three were steady, endorsing the fact that the famed “Animal Spirits” are back!
Is the recovery being led by just pent-up demand and inventory re-stocking? No, that is not the case. There is a genuine rise in aggregate demand. For example, Maruti Suzuki reported 18.9% growth in total sales, including exports, in October 2020, at 1.82 lakh units. Of this, 1.66 lakh units were sold domestically. That basically means that more than four cars were sold every single minute! Even in September 2020, Maruti sold 1.64 lakh units. The highest number that it achieved by way of domestic sales, prior to 2020, was way back in July 2017, when it sold 1.53 lakh units. In fact, in just the 9 days of Navratri, Maruti sold 95,000 vehicles this year, compared to 65,000 units in the same period last year. Overall, passenger vehicle sales, a key indicator of demand, rose 26.5% in September and 17% in October, when compared with numbers from a year ago.
Activity in India’s dominant services sector also continued to recover, with the main index rising to 49.8 in September, from 41.8 in August. That’s a marked improvement from April’s record low of 5.4. Manufacturing activity was a bright spot too, with the purchasing managers index (PMI) rising to 56.8 in September and a solid 58.9 in October, the highest readings since January 2012, on the back of a sharp expansion in new work orders, according to IHS Markit. This helped the composite index back into expansion territory at 54.6 in September.
Exports returned to positive territory too with shipments rising 6% in September, year on year (YoY), driven by farm exports, shipments of drugs and pharmaceuticals, engineering goods and chemicals. It is true that industrial production fell 8% in August from a year earlier, but it was smaller than July’s revised 10.8% contraction. Capital goods output dropped 15.8% from a year ago in August, but again, it was milder than the 22.8% drop seen in July. Output at infrastructure industries, which make up 40% of the industrial production index, shrank 8.5% in August, versus a steep fall of 37.9% seen in April 2020. Clearly, the pace of decline in key sectors has been stemmed, which is good news as it is never easy to stand back erect after being hit by the worst global pandemic in 102 years. That India, under the consummate leadership of Prime Minister Narendra Modi, has been able to withstand, fight back and recover more sure-footedly than a whole host of other nations, is laudable. That “animal spirits” have taken centre-stage, with recovery being a full blown one in coming months, is best amplified by the GST collections of Rs 1.05 lakh crore in October, 2020 versus Rs 95,480 crore in September.
The e-invoicing system under the goods and services tax (GST) regime got off to a smooth start in October, overcoming initial apprehensions, with invoice generation per day rising threefold within a month of its roll-out. About 2.4 million invoice reference numbers (IRNs), or e-invoices, are being generated daily now, compared with 800,000 on 1 October, when it was made mandatory for entities with turnover of Rs 500 crore or more.
Digital payments via Unified Payments Interface (UPI), worth Rs 1.92 lakh crore, also crossed 1 billion transactions in volume terms in the first 15 days of October, with a full month›s figure likely be more than 2 billion transactions, a feat that has never been reached since its inception in 2016. In September too, UPI clocked record high volumes of 1.8 billion transactions worth Rs 3.29 lakh crore. Google Pay was downloaded more than 12 million times in September, of which over 80% installs came from India. PhonePe, Paytm and SBI YONO’s downloads were also recorded at 6.9 million, 3.9 million and 3.1 million, respectively.
Meanwhile, India›s total foreign exchange (forex) reserves stood at $560.532 billion on 23 October 2020, the highest ever. In the 1991 crisis, India did not have forex reserves to finance even 6 weeks of imports, whereas, today, thanks to the excellent management of external finances by the Modi government, India can finance over 17 months of imports very comfortably. FDI inflows between April-August this year were $35.73 billion, a rise of over 13% YoY, vindicating that overseas investors continued to invest in India, reposing faith in Prime Minister Modi›s reforms, despite the pandemic which crushed business sentiments worldwide. A moot point worth noting is that, in September 2020, oil imports fell 35.92%, to $5.82 billion. During April-September 2020-21, oil imports contracted by 51.14% to $31.85 billion. Non-oil imports in September too fell 14.41%, to $24.48 billion, with non-oil imports during the first half of the current fiscal year declining by 36.12%. Gold imports dipped by 52.85% during September this year, which bodes well. The fact that the pace of the fall of non-oil imports is much lower than fall in oil imports and gold imports is good news as it shows the recovery is gathering steam.
Allegations of a jobless recovery are also absolutely false. Nearly 9.3 lakh new members joined the ESIC-run social security scheme while nearly 6.7 lakh new subscribers joined the EPF scheme in August 2020. The number of new members in both schemes has significantly surged over the previous month. In July, nearly 7.5 lakh new members joined ESIC while around 6.5 lakh new subscribers joined the EPF scheme. Taking together the new entrants and those who exited but returned, the net addition in EPF subscribers was nearly 10 lakh in August, after factoring out those who left. This shows that formal sector jobs are coming back and is good news.
Earnings from goods› transportation via Indian railways continued to rise in October, indicating recovery in demand and an uptick in economic activity. Freight loading grew 18 % year on year (YoY) at 43.46 mt as of 13 October, while earnings jumped 11% on year to Rs 4,124 crore. Cement and coal segments comprise more than 50% of freight movement for Indian railways. As of 13 October, the national transporter carried 19.13 mt coal, compared to 17.20 mt a year ago. As much as 4.36 mt of cement was transported in October, compared to 3.28 mt. Similarly, as much as 126 automobile rakes were loaded in October, compared to 74 rakes last year. This is by far the biggest indicator of how “animal spirits” are taking centre stage. The average loading of 53,774 wagons per day was up 16.5% YoY in October. India’s power consumption grew 13.38% to 110.94 billion units (BU) in October, mainly driven by buoyancy in industrial and commercial activities. Electricity consumption in the country had been recorded at 97.84 BU in October 2019.
Further proof of the economic revival was evident in India›s September retail spending, that rose 12% from August, with the revival being strongest in rural areas, according to data collated by CMS Info Systems, which handles cash movement and ATMs across the country. CMS said it gathered the data by tracking cash movements in 98% of the country›s districts from 53,000 retail points and 62,000 ATM services.
An amount of Rs 2.03 lakh crore has been sanctioned under the ECLGS scheme to 60.67 lakh borrowers so far, while an amount of Rs 1.48 lakh crore has been disbursed. Under the scheme, fully guaranteed and collateral-free additional credit to MSMEs, business enterprises, individual loans for business purposes, and MUDRA borrowers is provided to the extent of 20% of their credit outstanding as on February 29, 2020. Needless to add, Prime Minister Narendra Modi’s vision of “Aatmanirbhar Bharat” has grown wings and the target of a $5 trillion economy in the foreseeable future is increasingly looking very, very realistic indeed.
“Aatmanirbhar Bharat is not just about competition but also about competence, it’s not about dominance but about dependability, it’s not about looking within but about looking out for the world. A self-reliant India is also a reliable friend for the world.” This powerful quote by Prime Minister Narendra Modi sums up the ethos of “animal spirits”, reforms, inclusivity and India›s global outreach, in PM Modi’s charismatic style, driving home the point fair and square.
The writer is an economist, national spokesperson for the BJP and the bestselling author of ‘Truth & Dare: The Modi Dynamic’.