Whatever be the actual indices simmering underneath our reported GDP growth numbers, clearly there is a global slowdown, and a corresponding ?near stagnant? situation in India. The venerable head of our central bank accepted as much, when he said recently that the top reason for our current crop of bad loans is economic downturn. Under such circumstances, only the very brave will forecast an 8 to 9 per cent demand growth for the cement industry in FY 2017, particularly in the backdrop of a meagre 4.5 per cent notched up in FY 16. To my surprise, I do see a few instances of such bravado! While the leading cement players are forecasting an average of about 7 per cent demand growth in the current financial year, some industry analysts are more optimistic in projecting an even higher growth of consumption, around 8 to 9 per cent.

It is often said that morning shows the day. In that sense, March and April months of 2016 may be pointers to what one can expect in the full year. Let?s take a look at some of the stats. For the full fiscal 2015-16, the eight core sectors (like Coal, Crude, Fertilisers, Cement, Steel, etc.,) which comprise nearly 40 per cent of India?s total industrial output, grew at only 2.7 per cent against 4.5 per cent growth in the previous year. However, the story is somewhat different for the month of March, the exit month of last fiscal. In March, these sectors grew an impressive 6.4 per cent, vis-+?-vis a shrinkage of 0.7 per cent observed in March 2015, and cement contributed in this expansion in no small measure, by growing @ 11 per cent.

Contextually, we must keep in mind that the quarter of Jan-Mar, and the month of March have always been positive for the cement industry, for reasons which can be easily assigned. Is March, therefore, a reliable trend that can be extrapolated? What about April 2016? Official statistics will be available later, but an indirect reflector like the Nikkei India Manufacturing Purchasing Managers? Index (PMI), is reported to be 50 in April against 52 in March. So, if the March numbers were good, April has been a bit of a dampener. In spite of such conflicting signals emerging, the mood of the industry seems to be upbeat, expecting a turnaround of demand in this year. This could be based on a few salient assumptions.

• IMF has recently reaffirmed faith in India?s growth story, having projected 7.5 per cent GDP growth in this year for the Indian economy. Going by the historical relationship between GDP Growth and Cement Demand Expansion, a 7.5 per cent GDP growth should trigger at least 9 to 10 per cent of Cement Consumption hike.

• However, this can be fallacious, because the old calculation of Cement Demand may have become invalid in the new series of GDP growth numbers, which are now based on added value, rather than on factor costs. This is also somewhat borne out by the fact that in 2015-16, while GDP has likely grown @ 7.3 per cent, Cement has grown only by 4.5 per cent.

• The Met department has assured us of a robust monsoon. If that happens on the back of a few successive years of depressed rainfall, the rural economy and rural consumption may get a shot in the arm. If this assumption regarding impending monsoon materialises, this may have a substantial effect on retail cement demand.

• Another assumption we seem to be making, is that government/PPP investments in Infra Projects will pick up speed in this year, thereby significantly pushing cement demand in the institutional segment.

A balanced analysis of these assumptions tells me that we may have to wait till the onset of calendar year 2017, for cement demand growth to really accelerate, and meet the expectations of the Industry.