Effects of demonetisation receding, GDP growth set to rise in FY18

By: |
Published: April 1, 2017 4:46:41 AM

The CII-BCG monthly growth survey of CXOs across sectors indicates that overall, February sales grew by ~2% across all CEO respondents, clearly better than January growth.

CII-BCG monthly growth survey, CXOs, demonetisation, capex growth, Building materials, Material handing equipment, Engineering products, Welding, Auto componentsThe CII-BCG monthly growth survey of CXOs across sectors indicates that overall, February sales grew by ~2% across all CEO respondents, clearly better than January growth. (Source: Reuters)

The CII-BCG monthly growth survey of CXOs across sectors indicates that overall, February sales grew by ~2% across all CEO respondents, clearly better than January growth of 1%, indicating that the effects of demonetisation were receding. However, this performance was considerably lower than the 7%-8% witnessed in Q1-Q2 of FY17. But average order-book inflows, which is an indicator for sales in upcoming months saw an improvement of around ~7.3%.

Moreover, the growth rate turned positive for most sectors in February after a relatively muted January, with auto components leading in terms of planned growth for FY18. Industry participants were planning for ~11.6% revenue growth, ~9.8% net profit growth and ~8.6% capex growth in FY18 compared to FY17.

Building materials
Respondents witnessed an average revenue growth of 3.1% (with volumes growing by around 2.5%). Northern region seemed to have performed the best, clocking 4% positive growth, while southern and western regions registered worst performances with 2% and -1% performance respectively. The sector is clearly on the recovery path after a de-growth both in value and volume terms in January.

Material handing equipment
Respondents reported an average revenue growth of 3.8% (with volumes increasing 7%). The eastern region showed the highest growth rate of 5%, whereas the southern region performed the worst with a de-growth of 4%. Demonetisation effect in the sector is almost negligible now. However, most of the players are in the wait and watch mode since the impending GST implementation is expected to have a huge impact on the logistics and warehousing sectors, two of the biggest consumers of material handling equipment.

Engineering products
The sector witnessed strong growth in February with respondents reporting a value growth rate of 4% (volumes increased by 6%). The western and the southern parts of the country clocked growth rates of 4% and 6%, respectively, whereas the northern and eastern regions grew around 3% each. Demonetisation effect was short lived and has ceased to be a concern in the sector, with >75% of respondents experiencing growth in new order flows.

You might also want to see this:

Welding
Respondents in the welding sector experienced strong overall value growth at the rate of 11% (with volume growth of 4%), largely backed by increased exports. The northern and the western regions of the country witnessed the highest growth of 5% and 6%, respectively, whereas the Eastern region was the poorest performer growing by a mere 1%. Demonetisation effect has rapidly diminished. However, caution is being maintained ahead of GST implementation. Capex investments are being encouraged in the sector.

Auto components
Respondents witnessed de-growth of 0.8% in terms of value (volumes de-growing around 0.3%). Western, northern and southern regions clocked a 1% growth rate, whereas the eastern region de-grew at the rate of 1%. Return of positive growth in the commercial vehicles segment (~7% yoy for February) seen as a good sign for the auto components sector. Auto-components sector planning for the highest growth for FY18 in terms of revenue (13.9%), net profit (9.8%) and capex (8.6%).

The author is partner and director, BCG, Sangita Das, deputy director, CII and Mani Singhal, principal, BCG.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.