Though the IMF 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 area, 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 y-o-y data don’t capture this, seasonally adjusted data show a fall for many months; the fall in capital goods is particularly severe; core sector growth has also slowed.
Growth in net sales for India Inc has fallen to 23.7% in Q1 and this reduces to 17.2% if you exclude oil companies. Profits growth has gone into negative territory — it remains positive at 12.7%, but sharply reduced from the 60.3% of Q4 2009 if you remove oil firms. In each case, things are worse for the PSUs. Growth in the cost of raw materials has reduced a bit; as a ratio of net sales it has risen somewhat. Staff costs to net sales are up for the private sector. Operating profit margins are steady at over 19 per cent for the private sector but have collapsed for the public sector — expect a further reduction once the oil-marketing PSUs numbers come in. Tax collections are in the negative zone thanks to the PSUs. The software sector has maintained its net margins; steel has seen a collapse from 13.1% in Q4 2009 to 9.8% in Q1; despite rising sales, margins are down for automobiles from 9.3% to 7.6%; power generation is down from 17.3% to 14.8% and electrical equipment from 10.6% to 7.6%. Funds raised in the capital markets, both in India and abroad, have fallen a third in this quarter. All this could change if growth prospects look up globally, but with the likelihood of a slowing in both the US and the Euro area, this could take a while. The rate hike hasn’t helped, though the RBI’s view is that inflation is a bigger danger.
