Volume-based indicators: Higher growth in March raises hopes of strong FY19

“Half of the 16 early volume-based indicators recorded a sequential deterioration in the year-on-year growth performance in March 2018, which was along expected lines given the unfavourable base effect. Nevertheless, nine of the indicators recorded an expansion in excess of 8 per cent in March 2018, suggesting that the underlying growth momentum remains healthy,” said ICRA.

While the pace of expansion of auto production declined in March to 18.6 per cent from 27.3 per cent registered in February 2018, led by decline in growth rate of passenger cars, the report pointed that the demand for scooters (12.4%), commercial vehicles (24.8 per cent) and motorcycles (24.7 per cent) continued to be in double digits despite unfavourable base effect, said the ICRA report.

Coal India limited’s production in March came as a good news as the output expanded by 9.4 per cent in March (highest in last five-months). By contrast, the previous three months registered a growth of under 3 per cent in CIL’s output. The report also pointed that the growth of thermal electricity generation rose to 5.5 per cent in March 2018 from 4.1 per cent in February 2018. Another indicator that came as a positive was expansion in consumption of petrol and diesel improved to 14.2 per cent and 8.0 per cent, respectively, in March 2018 from 10.1 per cent and 6.1 per cent, respectively, in February 2018.

Even the ATF consumption grew by 11.1 per cent in March 2018 up from 8.1 per cent in February 2018, in line with the sharp sequential pick-up in expansion of passenger traffic by domestic airlines to 28.0 per cent from 24.1 per cent, respectively, the ICRA report highlighted.

While a number of these volume based economic indicators support prospects of better growth in future, even a report prepared by EY projected better growth on the back of good monsoon and domestic consumption demand. “Domestic drivers of growth appear to be robust. The India Meteorological Department (IMD) indicated that monsoon for the current year is expected to be normal … Early estimates indicate that the rainfall may be around 97 per cent of the long-run average. Manufacturing output and investment demand show signs of strengthening. Domestic consumption and investment demand may remain strong during 2018-19 with general elections scheduled for 2019. Fiscal policies at the central level and, in most states, are likely to support government expenditure – both consumption and capital expenditures,” said a report by EY.

However, some key indicators which raise some concerns. The ICRA report points that while the pace of growth of rail freight eased to 3.9 per cent in March 2018 from 4.1 per cent in February 2018, cargo handled at major ports eased to 2.9 per cent in March 2018 from 9.1 per cent registered in February 2018. The report pointed the decline in growth of cargo handled was led by a slowdown in shipments of fertilizer, iron ore and petroleum products in that month.