Agriculture is shining despite the scorching heat due to the halt in manufacturing
Agriculture and allied sector registered a decent 4.1% expansion in the March quarter and continued to be a bright spot in the GDP figures in the latest estimate released earlier this month, while intense heat reduced wheat yields and agriculture The ministry lowered the cotton crop forecast. ,
However, contraction in the manufacturing sector in the fourth quarter of FY22, though modest and on a favorable basis, does not bode well for the promise of a quick and sharp turnaround in private capital expenditure. Growth in the manufacturing sector, higher input costs, entangled global supply chains and the Covid-induced curbs on mobility in the early months of the previous quarter fell to -0.2% against 0.3% in the previous quarter.
Furthermore, as noted by Kunal Kundu, India economist at Societe Generale, manufacturing contracted as expected but “a strong inventory build-up suggests weak demand.”
The turnaround in stocks, which remained in negative territory in FY2011, accelerated sharply in FY12 to reach Rs 51,450 crore in the March quarter.
Rising interest rates, steady rise in commodity prices (Brent crude has hit $120 a barrel), continuation of supply-chain woes will pose downside risks to manufacturing prospects in the current fiscal.
Of course, some relief in Q1 could come from the base effect (despite sharp year-on-year growth in Q1FY22, manufacturing was marginally higher than the same period in FY15).
As far as agriculture is concerned, some analysts expect a marginal fall in the growth forecast for the later March quarter, given the severe impact of uncertain weather on crops in March and April.
However, going forward, the forecast of normal monsoon, its early arrival over Kerala coast and expectations of good geographical distribution have brightened the hopes of another bumper crop in the crop year beginning July.