Expectations falter

by Mahesh Vyas

Consumer sentiments declined by nearly three per cent during the week ended June 25. Last week the sentiments index had risen by 5.7 per cent and before that it had fallen by a similar measure. The consumer sentiments index has been bobbing within a narrow range since May this year, almost unsure of itself. This is unlike big trends seen in the preceding four months.

The index rose for three consecutive months during October, November and December fuelled by a good kharif crop and great expectations from demonetisation. The cumulative rise was a massive 7.7 per cent, or a rate of 2.6 per cent per month. Then, the index fell for the following three consecutive months from January through March at the rate of 3 per cent per month.

Compared to these big trends, recent months have been docile. The index did spike in April because of the loan waiver announced in Uttar Pradesh. But, although many states have announced loan waivers following Uttar Pradesh, the index has weakened. It did not sustain its exuberance even till the end of April.

Something is amiss.

Consumers seem to be losing confidence that their future would be brighter than their current economic conditions. A greater expectation about the future has been a constant factor in Indian consumers. In the recent past we seem to have always believed that Acchhe Din Aane Wale Hain. But, this belief seems to be waning.

In the week ended June 25, the index of consumer expectations was 3.5 per cent lower than the index of current economic conditions. Since both indices have the same base period in September-December 2015, it is apparent that the expectations sentiments have worsened more than perceptions of current conditions.

During most of the past, expectations were higher than current conditions. But during the last two weeks the consumer sentiments index has remained below the current conditions index. While the Index of Consumer Expectations (ICE) was 3.5 per cent lower than the Index of Current Conditions (ICC) in the week of June 25, it was 2.2 per cent lower in the preceding week.

In four of the past eight weeks, the ICE has been lower than the ICC.

Besides, this current weakness of the ICE is across rural and urban regions.

Rural India is stressed as prices of agricultural commodities have been depressed in recent times. While several state governments have announced handsome loan waivers, prices of agricultural commodities have not improved. Since it is severely depressed prices that negated all the gains of a handsome kharif crop of 2016, farmers are reluctant to sow foodgrains enthusiastically during this kharif season.

Acreage was higher by 9.3 per cent by June 23, but the areas of stress are visible. Acreage under arhar is down by 70 per cent and moong is also down. Acreage under pulses is down by 33 per cent. The overall increase is largely because of sugarcane and cotton.

Cane acreage has improved in Maharashtra because of low base last year and because prices are good. Similarly, cotton sowing is up in response to good demand. Both, cane and cotton do not go through those dreaded cash-starved mandis that cannot pick-up the inflow from farms.

The monsoon was good during the first two weeks of the season but, the third week wasn’t very good. The monsoon’s onset into Kerala was well on time and its progress into the rest of the country has been slow. But, Kerala and Karnataka received less than satisfactory rains.

Understandably, given the loan waivers, farmers are happy about their current economic conditions, as their liabilities have been reduced. But, their outlook still does not look good.

In urban India, the labour participation has stopped falling. But, it has been so abysmally low at 40-41 per cent for such a long time, that it seems to have evolved into a severe sense of hopelessness in urban India. It is the summer months of April, May and June that witnesses a rush of new graduates into the labour force. During this time, we expect labour participation and unemployment to increase simultaneously.

But, we saw the LPR and the unemployment rate fall during April and May. The small variations of June are too insignificant to signal any change in reality.

The fall in the all-India Index of Consumer Expectations during the past two weeks seem to suggest that the Indian economy is unable to deliver and that expectations are belied.

First Published in Business Standard Link

Unemployment Rate
Per cent
4.3 +0.0
Consumer Sentiments Index
Base September-December 2015
95.1 +0.4
Consumer Expectations Index
Base September-December 2015
94.8 +0.3
Current Economic Conditions Index
Base September-December 2015
95.5 +0.5
Quarterly CapeEx Aggregates
(Rs.trillion) Sep 16 Dec 16 Mar 17 Jun 17
New projects 2.38 1.50 2.97 1.71
Completed projects 2.23 0.95 1.86 1.12
Stalled projects 0.65 1.01 0.35 2.66
Revived projects 0.91 0.18 0.62 0.29
Implementation stalled projects 0.38 0.82 0.33 0.67
Updated on: 22 Sep 2017 4:20PM
Quarterly Financials of Listed Companies
(% change) Sep 16 Dec 16 Mar 17 Jun 17
All listed Companies
 Income 2.1 6.2 10.2 10.2
 Expenses 1.9 6.3 11.9 10.5
 Net profit 14.6 40.3 16.7 -18.4
 PAT margin (%) 6.9 6.1 6.1 5.4
 Count of Cos. 4,500 4,502 4,424 4,203
Non-financial Companies
 Income 0.6 5.9 11.7 10.8
 Expenses -0.2 7.2 15.5 11.0
 Net profit 26.6 24.5 -2.2 -23.7
 PAT margin (%) 6.9 6.2 6.3 5.3
 Net fixed assets -9.2 7.6
 Current assets 8.1 2.0
 Current liabilities 11.6 8.5
 Borrowings 3.1 4.8
 Reserves & surplus 8.4 6.5
 Count of Cos. 3,481 3,487 3,436 3,285
Numbers are net of P&E
Updated on: 22 Sep 2017 4:30PM
Annual Financials of All Companies
(% change) FY13 FY14 FY15 FY16
All Companies
 Income 12.6 10.0 5.0 1.0
 Expenses 12.8 9.9 5.1 1.2
 Net profit 1.0 -2.2 1.1 -15.2
 PAT margin (%) 3.5 3.2 3.2 3.0
 Assets 14.3 12.3 9.4 8.8
 Net worth 9.6 9.6 8.8 7.7
 RONW (%) 6.8 6.2 6.1 5.3
 Count of Cos. 25,932 23,621 23,131 19,375
Non-financial Companies
 Income 11.9 9.7 4.1 0.0
 Expenses 12.3 9.3 4.3 -0.6
 Net profit -8.4 -2.4 -6.3 6.5
 PAT margin (%) 2.4 2.2 2.1 2.7
 Net fixed assets 12.9 11.6 13.1 13.9
 Net worth 7.9 8.2 7.3 7.0
 RONW (%) 5.5 5.1 4.9 5.6
 Debt / Equity (times) 1.1 1.1 1.1 1.0
 Interest cover (times) 2.1 2.0 1.9 2.0
 Net working capital cycle (days) 72 69 67 67
 Count of Cos. 20,312 18,893 18,620 15,945
Numbers are net of P&E
Updated on: 21 Sep 2017 10:15AM

Time-series available since 2007-08

Growth dropped to 5-quarter low during Q1 2017-18