Updated on 23rd September


  • Economy upbeat, but agri taking a hit
  • With lower foodgrain output, pressures on prices to harden over the next quarter
  • Manufacturing input prices still under stress
  • Inflation numbers have moderated, but upside risks significant still, expect RBI to hold on rates
  • Innovative marketing needed to push consumer durable sales this festive season
  • FMCG and retail sectors forced to look for growth in fresh markets


There is mixed news on the macro-front, with the move out of the less than 5% growth trough coming through as anticipated; the April-June quarter growth showed up at 5.7%. This came in higher than the Indicus forecast of 5.3% essentially because of higher than expected growth in construction, government and social expenses. With current trends, growth for this year is set around 5.5%. Even as the industrial climate is improving, agri has taken a hit this year. The 1st Advance Estimates of the year show a decline in output, thanks to the delayed monsoon. The deficit in rainfall will also impact the rabi crop ahead. While agri incomes will be affected this year, budgets will also be strained by higher prices for the basics. Even though the inflation numbers have trended down, a large part of this is the base effect of extremely high inflation last year. So when onions, for instance, are selling at more than double their price in 2012, yet register a negative inflation for this year, the inflation numbers have little meaning for housewives struggling with their budgets. Thanks to the poor monsoon, followed by floods in large parts of the country, firms looking to rural markets for growth will find the going tough.


What about industry? Even as IIP and PMI data point to a uptrend overall in the manufacturing sector, the segments of capital goods and consumer durables continue to lag behind. Clearly, we are far from a sustained surge in industrial activity. While auto sales do show better performance compared to last year, the industry is cautious as the turnaround is slow, and follows two years of damped sales. On the consumer durables front, it is true that firms are banking on the improved sentiment and optimism in the country, yet are wary of the reality – persistent prolonged inflation has made consumers more demanding and interest rates are still high and not set to go down in the near term; firms are pulling out the punches in innovative marketing this festive season.


There appears to be a churn going on in the government, as far as processes, approvals etc are concerned. There is a huge backlog to be cleared, not just in investment proposals and projects, but also in reforms like labour, tax laws etc. We continue to wait for a real meaningful recovery of the economy.