Industrial manufacturing is struggling. The Large-Scale Manufacturing numbers released by the PBS show 1Q LSM down by 0.4 percent – a first since peak Covid. The cumulative LSM index has stayed in the negative territory for three straight months –another first in two years. Sky-high prices, depreciating currency, eroding purchasing power, commodity super cycle, energy challenges – it was all cooking up nicely for contraction in large scale industrial activity.

And the slowdown is now becoming more broad-based with every passing month. Nearly two-third of the items tracked by the QIM methodology underwent a decline over previous quarter. It started to worsen around the start of the fiscal year – when half the items were showing year-on-year decline. The slowdown has now spread to the three heavyweights – textile,foodand petroleum sectors – for varying reasons.

The flood impact is expected to have kicked in by the end of 1QFY23 on large scale industrial activity in the food sector. Surprisingly, the beverages, mainly soft drinks and mineral water have continued to grow steadily, despite all inflationary pressures. Textile has been weak for some time, although the slowdown remains in low single-digits.

Petroleum consumption across the country has dwindled significantly as pump prices have soared appreciably over last year. The situation is not expected to reverse anytime soon, and the downside should likely persist deeper into the fiscal year. Pharmaceutical industry has also joined the bears, as pricing row with the government drove a 28 percent decline in tablet production. The industry produced 1.3 billion fewer tablets in the first quarter over the same period last year.

Cement and automobile have been down for quite some time – and with the interest rates not in any hurry to go back to single digits or any lower from here – any significant uptick in demand can be ruled out in the near-term. Within the automobile sector, the slowdown has spread to even the motorcycle segment – with a massive 43 percent drop in motorbike sales over last year.

The export-oriented sector continues to headline the LSM performance, without which, it would have cut a sorrier figure. Export quantities of readymade garments, football, and furniture–at 58, 59 and 126 percent year-on-year, kept the LSM from being deep in red. Enough has been said and written on the fairness of export quantities used to measure LSM. The jury is out on export sector outlook, as the West faces its own issues. Should the export quantities dip or even moderate in growth – the LSM could come down in a jiffy.