The Indian economy is well and truly on the growth path. An affirmation of this came in the form of an impressive first quarter performance by listed Indian companies across key sectors like banking, FMCG, automotive, and paints, which have recovered sharply from the recent lows. What’s more, recent forecasts for the economy have added to the optimistic outlook for FY24. The International Monetary Fund (IMF), in its July 2023 update of the World Economic Outlook, raised India's projected growth from 5.9 per cent to 6.1 per cent, a positive sign of economic recovery. Close on the heels of the IMF, international rating agency Fitch revised India's growth projection for FY24 to 6.3 per cent from 6 per cent. The ADB, in its July 2023 Asian Development Outlook, projected an even higher growth of 6.4 per cent for India in FY24.
High-frequency indicators for May and June 2023 too attest to strong growth momentum during 1QFY24. The Purchasing Manager's Index (PMI) for manufacturing and services maintained elevated levels of 57.8 and 58.5, respectively, in June 2023 (see chart). Notably, the PMI, an economic indicator derived from the monthly survey of the private sector companies, averaged 57.9 in Q1FY24, its highest since Q4FY10, while PMI services averaged 60.6, its highest since Q1FY11. Bank credit sustained double-digit growth at 15.4 per cent in May 2023, despite a slight moderation from 15.9 per cent in April 2023.
"PMI services remained above the threshold of 50 for 24 consecutive months, with its level at 58.5 in June 2023 as compared to 61.2 in May 2023. On a quarterly basis, PMI services averaged 60.6 in 1QFY24, its highest level since 1QFY11," says D.K. Srivastava, Chief Policy Advisor, EY India in his overall analysis. As to the agriculture sector, Srivastava says that output may witness a normal growth of about 3.5 per cent in FY24, remaining close to the decadal average of 3.7 per cent (FY12 to FY23). “There would, however, be certain seasonal and spatial peaks in food and vegetable prices due to the uneven distribution of the South West Monsoon,” he adds.
The automobile sector, experts say, has also maintained a robust trajectory with a 9.6 per cent growth in retail vehicle sales in June 2023, showcasing strong consumer demand during the first quarter of 2023-24 fiscal year. Additionally, gross GST revenues also saw an uptick, reaching Rs 1.61 lakh crore in June 2023, up from Rs 1.57 lakh crore in May 2023. These revenue figures reflect a positive trend in economic activity, experts point out.
These data points collectively reaffirm India's enduring economic resilience and promising prospects for the fiscal year. The strong performance across sectors not only underscores India's ability to navigate challenges but also positions it for sustainable growth in the global economic landscape. As the nation progresses through FY24, the momentum displayed in the first quarter offers encouraging insights for investors, businesses, and policymakers alike.
A disclaimer is necessary here though. Since the Q1FY24 results of a number of companies are awaited at the time of filing this report, this report, therefore, captures the data and trends based on companies whose results have been declared.
Banks Perform Well
The success of India's banking sector shines through as evidenced by the latest financial disclosures. State Bank of India (SBI), the nation's largest lender, saw its net profit surge an astounding 178 per cent to Rs 16,884 crore for Q1FY24 from Rs 6,068 crore in the corresponding period last year. SBI projects a credit growth of 14-16 per cent and a deposit growth of 13-14 per cent for the ongoing fiscal year. Dinesh Khara, SBI's Chairman, reaffirmed the commitment to this trajectory, aligning it with the nation's nominal economic growth. “I have been maintaining a 14-16 per cent credit growth and I will stick to the number because we normally look at it in terms of the nominal growth of the economy and we should be growing at a faster rate,” said Khara.
In tandem, private sector banks also showcased robust Q1FY24 figures. HDFC Bank, the country's largest private sector lender, exceeded market expectations with its net profit. In its BSE filings, HDFC reported a 25.94 per cent YoY growth in consolidated net revenue in Q1FY24 to Rs 35,067 crore from Rs 27,844 crore in the same period last year. Notably, the bank's consolidated net profit rose 29.14 per cent YoY to Rs 12,370.38 crore. Concurrently, ICICI Bank, a key competitor, exhibited a 39.7 per cent jump in net profit to ₹9,648 crore for Q1 of the current fiscal year. This growth was underpinned by enhanced asset quality on a sequential basis.
The positive trajectory of these banking giants underlines the resilience and potential of India's financial sector amid evolving market dynamics and economic conditions.
FMCG and Paints Sectors Flourish
Hindustan Unilever (HUL), a prominent FMCG player, posted a standalone net profit of Rs 2,472 crore for Q1FY24, marking an 8 per cent increase over the previous fiscal's Rs 2,289 crore. The company's total revenue stood at Rs 15,333 crore, showcasing a 6.4 per cent year-on-year rise. HUL's CEO and Managing Director, Rohit Jawa, acknowledged the gradual recovery in FMCG markets amid a challenging operational environment. Jawa emphasised the focus on long-term strategic priorities and expressed confidence in HUL's consistent and competitive growth. "We remain focused on driving our long-term strategic priorities including market development and building distinctive capabilities for the future. I am confident of the medium- to long-term prospects of the Indian FMCG sector and HUL’s ability to deliver a consistent, competitive, profitable and responsible growth."
In his analysis, Amnish Aggarwal, Head of Research, Prabhudas Lilladher said, "With 73 per cent of sales in the home and personal care (HPC) segments growing volumes in mid-single digits, market dynamics and trade and consumer inventory will enable gradual increase in volume growth."
Dabur India saw an 11 per cent YoY revenue increase in Q1FY24, bolstered by strong growth in HPC and Home Care businesses. Amnish Aggarwal, Head of Research at Prabhudas Lilladher hailed Dabur's potential as a key player in rural India's growth revival. Emami reported an impressive 87 per cent jump in consolidated net profit to Rs 137.7 crore for Q1FY24. The company's Vice Chairman and MD, Harsha V. Agarwal, cited resilient domestic growth despite challenges.
Asian Paints, a prominent paint major, recorded a 52 per cent YoY growth in consolidated net profit to Rs 1,574.84 crore in Q1FY24. Despite macroeconomic hurdles and forex conditions, the company's CEO, Amit Syngle, highlighted steady international business performance. “Our international business was supported by good deliveries from the Middle East region. However, continued macroeconomic challenges and adverse forex conditions in Asian markets resulted in an overall subdued growth for the international portfolio," he said.
Titan Company, India's leading consumer lifestyle company, reported a revenue growth of 19 per cent in the first quarter of FY 2023-24. The total income for the quarter on a standalone basis stood at Rs 10,306 crore, while the consolidated total income was Rs 11,070 crore. “There are positive takeaways from the results of several large companies across sectors. For example, many category leaders have posted double-digit revenue growth and robust net profits in Q1FY24. All indications are that the next two quarters will also be profitable for many companies due to the firming up of the demand-supply cycle,” said a senior market analyst from Mumbai.
Optimism Galore
Economists, market experts and trade pundits who closely track India remain bullish on the growth story for the next nine months of the current fiscal year. In July, while reacting to the GDP data, Rumki Majumdar, Economist, Deloitte India said, “India enjoys a Goldilocks moment as it sees its economic activity gaining momentum amidst uncertainties.” Majumdar pointed to the strong growth in manufacturing and core industry index as indications that the supply side was improving. “It is heartening to see that IP for consumer durables has turned positive for the first time since December last year. This suggests that urban demand is also picking up. Consumer demand has been a concern for policymakers so a pick-up could help improve economic activity further,” she added.
With inflation remaining range-bound and, in fact, with the easing of core inflation (inflation excluding food and fuel prices) experts said it would help improve consumer spending going forward. Similar views have been echoed by India Inc as well. Articulating the growth outlook for the economy, R. Dinesh, President, Confederation of Indian Industry said, “CII expects the GDP growth in a range of 6.5-6.7 per cent in 2023-24, supported by strong domestic drivers and robust capex momentum of the government. The Indian economy remains resilient in the face of a challenging global environment, and we do not anticipate major domestic roadblocks in the year ahead.”