Though the International Monetary Fund has raised its global growth projection for this year by 0.4 percentage points to 4.6 per cent — it is 3.3 per cent for the US, 1 per cent for the Euro region, 10.5 per cent for China and 9.4 per cent for India —, things don’t look that rosy. With the stimulus programmes now coming to an end, the US is slowing — a consumer survey showed the lowest level of intended car-buying in more than 40 years; after removing inventory accumulation, Q1 growth of “final” sales was just 0.2 per cent compared to Q4 2009. In India, industrial production has fallen — while the year-on-year data doesn’t capture this, seasonally adjusted data shows a fall for many months; the fall in capital goods is particularly severe, while core sector growth has also slowed.
The growth in net sales for India Inc has fallen to 23.7 per cent in Q1, and this reduces to 17.2 per cent if you exclude oil companies. Profit has become negative; it remains positive at 12.7 per cent which has reduced from 60.3 per cent in Q4 2009 if oil firms are excluded. In each case, things are worse for the public sector units. However, growth in the cost of raw materials has reduced a bit as the ratio of the net sales has somewhat risen. Staff costs to net sales are up for the private sector. Operating profit margin is steady at over 19 per cent for the private sector but it’s collapsed for the public sector. Further reduction is expected once oil-marketing PSU numbers come in. Tax collection is in the negative zone, thanks to PSUs. The software sector has maintained its net margins; steel has seen a collapse from 13.1 per cent in Q4 2009 to 9.8 per cent in Q1; despite rising sales, profit margin is down for automobiles from 9.3 per cent to 7.6 per cent; power generation is down from 17.3 per cent to 14.8 per cent and electrical equipment from 10.6 per cent to 7.6 per cent. Funds raised in the capital markets, both in India and abroad, have fallen a third in this quarter. This can change if the growth prospects look up globally, but with the likelihood of a slow pace in the US and the Euro region, this could take a while. The rate hike hasn’t helped, though inflation is a bigger danger according the Reserve Bank of India.
