The tide is finally turning after a disastrous 15 months of large scale manufacturing performance. Having turned positive for the first time in 14 months in August 2023 – LSM for September 2023 showed 1 percent year-on-year growth. The low base is surely at play as the index value for September is still a little shy of the corresponding month two years ago. The reversal was always on the cards as the downturn that lasted for 15 months was the longest stretch of negative growth in recorded LSM history.

The cumulative LSM for 1QFY24 is also up, albeit, by a meager 0.68 percent year-on-year. As low base will remain in play for most part of the year – expect the graph to keep gradually inching up – much like previous instances of reversals from downturns.What is also heartening to note is the reversal is slowly broadening the base – with 11 of the 22 broad LSM categories showing positive growth during 1QFY24. This is in sharp contrast to most of last year – where there were instances of all, but the newly inducted (export quantities) categories were painted red.

In the detailed list, half of the 123 items are now showing positive year-on-year growth – up from nearly two-thirds being in the red for almost the entirety of FY23. The food sector was the first one that showed signs of resurgence, led by ghee, oil and wheat milling. Sugar has the second highest weight in the food basket, and the crushing season results will determine which way the food index goes – but a double-digit growth by the end of 1HFY24 appears unlikely. Beverages have stood ground – and the 1QFY24 production is only marginally lower than the peak witnessed in FY22.

Other high frequency production numbers from cement, fertilizer, and petroleum sector have registered double-digit growth – although still a fair distance away from the high seen earlier. Pharmaceuticals have the second highest impact with a 41 percent growth rate – but that too is coming at the back of a spectacular fall witnessed in FY23. Wearing apparel (readymade garments) continues to have the largest impact on LSM growth with only 6 percent weight. Readymade export volumes have increased significantly, even as unit prices have hit an all-time low, keeping dollar exports largely flat. Consider that the readymade garment LSM index value is at 271 versus 82 reported by all other textiles. There surely is room for improvement in methodology – as this does not necessarily reflect the true LSM story.

The largest industry by LSM weight continues to be in the red with yarn and cloth production hitting multiyear lows. Automobiles and white goods are also low on priority purchase lists as inflation, although having slowed down, has considerably eroded purchasing power of non-essentials. Tobacco is still reeling from last year’s effect of increased taxes – and the ground situation suggests that smuggled products are still making significant inroads into the retail market – making it tough for tobacco firms to make a comeback, just yet.

All in all, the LSM should continue its journey north – most likely, very gradually, for another quarter.