Large Scale Manufacturing index for the fifth month running recorded positive year-on-year growth, as April 2024 LSM grew 5.76 percent year-on-year. The tide is clearly turning, as April’s year-on-year growth is the highest in 22 months – dating back to when the rout had just begun. On a cumulative basis, the growth at 0.45 percent is the first positive reading in 22 months. The worst is well and truly over but the recovery by all means is going to be very slow from the looks of it.

Some context helps. April’s index at 106.35, while up from last year, comes off the lowest April index value (excluding the Covid quarter) from last year. LSM in April 2023 had fallen by a whopping 24 percent year-on-year – and the recovery only takes it higher year-on-year, as the index is still lower than even FY17 when the rebasing started.

The sectoral contribution is split equally on the positive and negative sides – with 11 of the 22 sectors returning positive and negative year-on-year growth. This is a marked improvement from a year ago, when all but two sectors were painted red as LSM reached the lowest point around this time last year. The biggest positive both in terms of growth impact and percentage change came from the pharmaceutical sector, as tablets and syrup production have rebounded from the all-time lows of last year. The pharma production is still not even halfway mark of the highs registered in FY22, indicating an optimistic view of pharmaceutical LSM growth to continue.

The wearing apparel, which takes into account exported quantities of readymade garments, tracked and published by none other than the PBS itself, features second on the list. The wearing apparel growth has been shown at 6.5 percent for 10MFY24. Counter data from the PBS monthly advance release files shows the readymade exported quantities having grown at a negative 1.3 percent. What is shown as the second largest contributor to LSM growth, should in fact be making a negative contribution to the overall growth – and the actual LSM reading should still be in the red. But it has been months and months of neglect – and no explanation, so one will have to live with yet another anomaly.

Furniture exports at under $7 million for 10MFY24 down 38 percent year-on-year – have a say as big as being the third biggest positive contributor to the LSM growth, with a share of 0.5 percent in the LSM basket. Textile continues to drag the LSM growth down both cotton cloth and cotton yarn remain stuck at decade-low production levels – and an 18 percent share in the LSM basket means textile remains the biggest negative contributor to LSM.

For sectors with a basket share in excess of 5 percent, only pharmaceuticals have grown in double-digits. Automobile, tobacco, and computers have shown negative growth in deep double digits, at or near all-time low levels.

Going forward, the low base from the last quarter of FY23 should keep the recovery on track. Budget measures if applied as were announced, could well act as a major headwind, especially when administered energy prices are already slared to go considerably higher and all concessions for industrial usage eliminated.