India’s GDP growth rates are consistently falling every quarter through calendar 2018, and the forecast for the fourth quarter of FY19 is a further drop. Mint says that eight of the 16 high-frequency macroeconomic indicators are in the red and only four in green, (indicating that) the Indian economy continues to remain weak. The Quick Estimates of Index of Industrial Production (IIP) with base 2011-12 for the month of December 2018 stood at 133.7, which is a measly 2.4 per cent growth as compared to the level in the month of December 2017. This shows that manufacturing sector is still limping along. The Centre for Monitoring of Indian Economy (CMIE), a much respected think tank, reported that 11 million jobs were lost in 2018 alone. India’s jobless rate shot up to 45-year high during 2017-2018, according to a report of National Sample Survey Organisation (NSSO). NSSO, an autonomous government institution, which is much acclaimed globally for its statistical expertise, showed unemployment rate at 6.1 per cent, the highest since 1972-73. Accordingly, all agencies have watered down growth forecasts for the last quarter, as well as for the full year 2018-19, to varying degrees. Among highly divergent data and views being expressed on the realty sector (one of the largest consumers of cement), one thing emerges as a consensus: no silver linings visible yet in the sector, other than perhaps the introduction of our first ever Real Estate Investment Trust (REIT). In fact, the first month of 2019 saw growth in the eight core sectors of the economy crash to a 19-month low at 1.8 per cent, slipping below even the dismal 2.8 per cent growth recorded in December 2018.

But it is not all gloom and doom, at least not for the cement industry. It continues to outshine its many of its core sector cousins, having trotted up a highly impressive 11 per cent growth year on year for the month of January 2019. And this showing comes back to back with a very good despatch growth numbers notched up in the previous month as well. Analysts and observers of the sector are projecting a very healthy 10 per cent growth for the cement industry in FY 19, as against 8.5 per cent last financial year (which also happened to be on an anaemic low base). The forecast for 2019-20 is now around 7 per cent on the higher base, and one can easily see that these pleasing numbers, caused mostly due to pre-election spends and infrastructure boost from the central as well as state governments, would result in higher capacity utilisation. Inspired by the immediate and the medium term prospects, many cement companies have increased prices significantly. Some say prices have increased by Rs 25 per bag on an average, and some other reports talk about Rs 77 per bag! This price rise has in turn triggered angry reactions from some stakeholders, such as CREDAI, and some governments, among them the Andhra Pradesh State Government, are already responding in one way or the other, given that this matter could become sensitive with elections round the corner.

For the investor community, the price rises together with lower costs of energy/fuel, can only mean better margins for the sector, and therefore, all round ?buy? suggestions are coming up.

Sumit Banerjee Chairman, Editorial Advisory Board