Industry has almost fully recovered from the GST shock and has grown by 2% for two months consecutively, according to a BCG-CII survey of CXOs across sectors. The western and northern regions led the revitalisation, with growth rates of 9% and 8%, respectively. South and east followed at the same rate of 5%. Most industries recovered entirely from the GST-hit experienced in June: Auto components (11.7%), building materials (9.4%), consumer durables (15.5%), engineering products (3.9%), fluid power (13%), material handling equipment (9.3%), and metals and mining (21%). The sole industry which saw de-growth was welding (-2.5%), which witnessed a net -9% as compared to August. In line with the market’s overall increasing trend, new order inflows (reflective of future growth) grew by 4.7% and 5.8% in August and September, respectively.
The positive sentiment towards GST impact in the medium and long run has started to bear out. In fact, during the first quarter of implementation, respondents perceived that actual and expected benefits from the new taxation system such as the streamlining of business operation and the easing of interstate movements well exceed negative ones. Meanwhile, most believe ‘labour market’ and ‘access to finance’ reforms are badly needed for improving the Ease of Doing Business in India.
Sector-wise, building materials recovered fully and, in September, it recorded an outstanding sales growth rate of 9.4%. In material handling equipment, a grandiose recovery was experienced by the sector which grew by 9.3% in September after recording a flat rate in August. New order inflows increased by 10% creating positive sentiments, and most players observed an increase in price competitiveness. The growth in new order inflows creates positive sentiments for the future.
Arun Bruce and Mani Singhal from BCG and Sangita Das from CII