Industrial activity continues to be suppressed, as the Large Scale Manufacturing index for Jul-Nov FY24 returned negative growth of 0.5 percent year-on-year. November 2023 marked the 17th straight month of negative cumulative LSM growth – well and truly a first in the country’s history. For November 2023, LSM inched up 1.59 percent year-on-year – first instance of positive growth in FY24. That said, LSM estimates are subject to changes in subsequent months, and the recent trend indicates that revisions have mostly been on the negative side. Recall that LSM had earlier shown positive growth for August and September 2023, but both readings have now been revised to negative growth.

In terms of LSM composition, there is progress, as cumulative LSM for 5MFY24 shows 12 of the 22 broad LSM categories showed positive year-on-year growth. The highest impact continues to come from the newly inducted wearing apparel segment – which in essence represents export quantity of readymade garments. Readymade garment exports show an increase of 21 percent during 5MFY24, at a time while general textile production shows 13 percent year-on-year decline. Both interestingly account for the biggest positive and negative impacts on overall LSM growth. Make what you will of this information, but it clearly shows that recording apparel export quantities to represent LSM may not be the brightest idea.

What stands out is the PBS’s treatment of wearing apparel data used to compute LSM index. As per the LSM values, the wearing apparel segment has registered an increase of 21 percent year-on-year, that translates not export quantity of 36.6 million dozen. The actual number as per PBS’s own export data released as Advance Release of monthly trade puts the quantity exported at 38.4 million dozen. But this could still be overlooked, not being that big a deviation.

What is truly striking is that the export quantity for the Jul-Nov period last year as per PBS source data stands at 35 million dozen, whereas the number used to compute LSM index puts the number as low as 30 million dozen – overstating the year-on-year growth. Actual wearing apparel growth during 5MFY24 is 9.6 percent versus the 21 percent shown for LSM purposes. It is highly likely the ones responsible for LSM tabulation do not take into account the frequent revisions that take place in export numbers. But that cannot be an excuse because monthly advance release numbers are made public ahead of LSM release.

Secondly, it is unthinkable for one institution, being the custodian of data releasing two entirely different readings. The overall LSM growth in reality, as a result of substantial overstatement of wearing apparel category, would be significantly lower than negative 0.8 percent reported for the period.

Of other LSM categories, food group has staged a rebound primarily based on growth in cooking oil and ghee production. Soft drinks have lost ground whereas juices category has gained a little. Automobiles and white goods continue to be painted all in red – with no respite in sight in the near future, given the drastic erosion in purchasing power.

Pharmaceuticals have risen from the ashes registering a strong 34 percent growth. That said, more than two-thirds of the 123 LSM items are still far from the highs seen in yesteryears – even the ones registering slight improvement from last year. The growth to recovery would be a very slow one, and if recent energy price adjustments are any guide, it could well halt.