8/24/23, 11:29 AM Economic Outlook

Economic Outlook
ANALYSIS 22 AUG 2023 07:55 PM

Uneven distribution in kharif sowing growth

(%) (%)
6 2
4 % change in actual area sown 0
2
0 -2
-2 -4
-4 -6
-6
-8 Rice -8 Pulses
-10 -10
2021 2022 2023 2021 2022 2023
Year Year

(%) (%)
1.50 2
1.45 Sugarcane Oilseeds
1
1.40
0
1.35
-1
1.30
1.25 -2
1.20 -3
2021 2022 2023 2021 2022 2023
Year Year
Centre for Monitoring Indian Economy Pvt. Ltd., 22 Aug 2023

August 2023 Review of Indian Economy: Sectoral Performance

by Kaustubh Jadhav

Kharif sowing almost flat

Sowing of kharif crops edged up over last year as on August 18, 2023. Area sown was up by 0.1 per cent
compared to last year’s level. Actual area sown had fallen consecutively in 2021 and 2022. Therefore, the
marginal rise in 2023 on the low base of last year does not amount to much.

Moreover, the increase was not distributed evenly across crops. Foodgrain sowing improved by almost one per
cent over last year. The 3.4 per cent increase in area under cereals was led by rice. Area under rice expanded by
4.3 per cent over last year. Maize has seemingly been a popular bet among farmers over the last few years. This
year was no exception. Area under maize grew once again; this time by 2.3 per cent. Area under sugarcane
continued a steady increase for the fourth year in a row. There has been a 1.3 per cent increase in the area
under sugarcane so far this year.

Pulses are not very popular among farmers this year despite prices of major pulses tur, urad, and moong ruling
well above their year-ago levels. Area under pulses as of August 18, 2023, was down by 9.2 per cent as
compared to a year ago. This was the second year in a row that area under pulses has suffered a contraction.

Oilseeds suffered a similar fate. Area sown under oilseeds sown slipped by 1.7 per cent as of August 18, 2023.
Among these, soyabean captured an additional 0.6 per cent area. However, groundnut saw a substantial 3.8 per
cent fall in acreage.

Rainfall, so far, in August has been weak. In the week ended August 16, 2023, rainfall was 57.4 per cent lower
than normal. As per India Meteorological Department (IMD), rainfall in the first 17 days of August was 40 per
cent lower than the normal. Monsoon has not revived so far, as the IMD had expected. The IMD said that the El

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Nino weather pattern has begun to impact the monsoon in India. The lack of revival of monsoon could affect
crop yields.

Progress of Sowing of Kharif Crops (As of 18 Aug 2023)

  Actual area (’000 hectare) % change in actual area sown
  2021 2022 2023 2022 2023
Agricultural crop 1,03,851.4 1,02,148.3 1,02,250.5 -1.64 0.10
  Foodgrain 67,469.2 64,591.6 65,211.1 -4.27 0.96
    Rice 37,462.7 34,579.3 36,079.1 -7.70 4.34
    Coarse cereals 16,742.0 17,359.9 17,639.2 3.69 1.61
      Jowar 1,386.9 1,482.9 1,375.1 6.92 -7.27
      Bajra 6,270.8 6,894.2 6,969.6 9.94 1.09
      Maize 7,900.5 7,941.9 8,124.9 0.52 2.30
      Ragi 715.0 598.4 704.1 -16.31 17.66
      Small millets 468.8 442.6 465.6 -5.59 5.20
     Pulses 13,264.5 12,652.4 11,492.8 -4.61 -9.17
       Arhar 4,673.8 4,371.5 4,091.9 -6.47 -6.40
      Other pulses 8,590.7 8,280.8 7,400.9 -3.61 -10.63
  Sugarcane 5,452.0 5,532.0 5,606.0 1.47 1.34
  Oilseeds 18,584.5 18,908.5 18,591.1 1.74 -1.68
  Of which,     Soyabeans 11,904.2 12,338.7 12,414.5 3.65 0.61
    Groundnuts 4,795.4 4,448.1 4,277.1 -7.24 -3.84
  Cotton 11,651.3 12,421.0 12,186.1 6.61 -1.89

Industrial activity below expectations

Industrial activity, as measured by the Index of Industrial Production (IIP), grew year-on-year by 3.7 per cent in
June 2023. Market expectations were of a much higher 5-6.5 per cent growth. The growth recorded in June
2023 was also a deceleration from the 5.2 per cent growth recorded in the preceding month.

The muted growth in industrial activity in June 2023 was due to a poor performance of consumer goods,
especially consumer durable goods. Output of consumer goods fell by 2.1 per cent in June 2023 compared to
its year-ago level. This was caused by a stunning 6.9 per cent fall in the output of consumer durable goods.
Output of two key components of consumer durable goods, passenger cars and two-wheelers, contracted
significantly. While output of passenger cars fell year-on-year by 9.8 per cent, that of two-wheelers fell by 4.8 per
cent. This, along with a plunge in the manufacture of apparel and furniture by 23.3 per cent and 12.6 per cent,
respectively, affected a fall in the output of consumer durable goods. The fall was also exacerbated by a higher-
than-usual output of consumer durable goods in June 2022. It was likely due to a remnant recovery from the
pandemic losses that production was high back then. This high base has yielded a larger fall in June 2023.

Output of consumer non-durables decelerated to a small 1.2 per cent growth in June 2023 from the handsome
8.4 per cent in the preceding month. Alongside, capital goods’ output growth also slowed down considerably
from 8.1 per cent in May to a paltry 2.2 per cent in June. The slowdown in the output of capital goods was
caused by a substantial fall in the production of many of the industrial and agricultural equipments.

Infrastructure goods’ output recorded a double-digit growth rate for the third month in a row. Output of
infrastructure goods expanded by 11.3 per cent in June 2023. The continuation of such stunning performance is
due to an increased demand owing to the strong capex push by the government.

Output of primary and intermediate goods also increased by 5.2 and 4.5 per cent, respectively. The growth of
the manufacturing sector, thus, was restricted to 3 per cent. This was almost half of the 5.8 per cent growth
recorded in the preceding month.

Electricity generation expanded by 4.2 per cent in June 2023, which was the highest growth rate in four months.
After disappointing in the three months prior, the decent growth in June came as a relief.

In July 2023, production of two-wheelers fell by 9.2 per cent compared to last year, according to data released
by the Society of Indian Automobile Manufacturers (SIAM). Production of passenger vehicles improved year-on-
year by 9.5 per cent. This was led by a 28.5 per cent increase in the production of multi-utility vehicles. Finished

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steel, which is used in the manufacture of automobiles, also saw its production increase by 10.8 per cent over
last year. We expect these to help the IIP in July 2023 to record a 4.9 per cent year-on-year growth.

Index of Industrial Production (Y-o-Y % change)

  Weight Apr 23 May 23 Jun 23 Apr-Jun 2022 Apr-Jun 2023
IIP 100 4.5 5.3 3.7 12.8 4.5
  By economic activity            
    Mining & quarrying 14.3725 5.1 6.4 7.6 9.1 6.4
    Manufacturing 77.6332 5.2 5.8 3.1 12.8 4.7
    Electricity 7.9943 -1.1 0.9 4.2 17.1 1.3
  By usage            
    Primary goods 34.0486 1.9 3.6 5.2 13.9 3.6
    Capital goods 8.223 4.6 8.1 2.2 29.6 4.9
    Intermediate goods 17.2215 0.4 3.0 4.5 11.6 2.6
    Infra/constn goods 12.3384 15.0 11.3 11.3 10.3 12.5
    Consumer goods 28.1685 5.5 5.5 -2.1 10.4 2.8
      Durables 12.8393 -2.5 1.2 -6.9 27.2 -2.9
      Non-durables 15.3292 10.8 8.4 1.2 1.2 6.7

Trade deficit high

Reducing commodity prices continued to affect foreign trade in July 2023. Both export and import bills fell
compared to a year-ago. Exports contracted by 15.9 per cent to USD 32.3 billion, whereas imports reduced by 17
per cent to USD 52.9 billion. The larger fall in imports compared to exports meant that the trade deficit was on
the higher side at USD 20.7 billion. This is the second time in three months that the trade deficit has crossed the
USD 20 billion mark.

The steep 24.2 per cent year-on-year fall in crude oil prices in July 2023 affected both exports and imports of
petroleum, oil, and lubricants (POL) in the month. Exports of POL slipped by 43.7 per cent to USD 4.6 billion. On
the other hand, POL imports were down by 36.7 per cent to USD 11.8 billion.

Non-POL exports stood at USD 27.7 billion in July 2023. This was 8.3 per cent lower than it was last year.
Exports of gems and jewellery, readymade garments (RMG), plastic and linoleum products, engineering goods,
and inorganic/organic/agro chemicals fell. The cumulative intensity of the fall in exports of these products was
restricted by an increase in exports of electronic goods.

Non-POL imports amounted to USD 41.2 billion. This was a 9 per cent contraction compared to last year. Big fall
in the imports of vegetable oil, fertilisers, coal, and pearls precious & semiprecious stones contributed to
theoverall fall in imports. Out of these, the imports of vegetable oil and fertilisers were due to a fall in their
respective prices. There was a 16-32 per cent fall in global vegetable oil prices and about a 40 per cent fall in
fertiliser prices compared to last year. This caused the fall in their respective import bills.

Imports of gold increased by 47.7 per cent in July 2023. This was likely due to a mix of prices and quantity of
gold. Price of gold in the London Bullion had increased by 12.2 per cent over last year in July. Electronic goods
imports also increased by an impressive 14.9 per cent. As a reflection of increased demand due to the strong
focus on capex, iron and steel imports expanded by 6.1 per cent.

Export & Imports

  May 23 Jun 23 Jul 23 Apr-Jul 2022 Apr-Jul 2023
USD billion          
  Trade balance -22.0 -18.8 -20.7 -88.1 -77.0
    Exports 35.0 34.3 32.3 159.2 136.2
    Imports 57.0 53.1 52.9 247.3 213.2
Y-o-Y % change          
  Total exports -10.3 -18.8 -15.9 21.5 -14.4
    POL -30.8 -36.0 -43.7 87.3 -32.5
    Non-POL -4.6 -13.1 -8.3 10.5 -9.3
  Total imports -6.7 -17.5 -17.0 42.8 -13.8
    POL -5.9 -33.8 -36.6 65.5 -23.2
    Non-POL -7.0 -10.7 -9.0 35.2 -9.9
     Gold & silver -42.5 43.0 2.4 25.2 -12.2

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       Gold -38.7 82.4 47.7 5.7 2.8

       Silver -93.9 -94.4 -97.2 4,700.3 -91.2
     Non-POL, non-gold & silver -0.9 -15.2 -9.9 36.2 -9.7

Railway freight disappoints

Revenue earning freight on the railways in July 2023 increased narrowly by 1.5 per cent over last year. About
124 million tonnes of freight was transported by the railways.

The largest contributor to the growth in railways freight traffic in July 2023 was the freight of iron ore. About
13.3 million tonnes of iron ore was freighted by the railways. This was 20.2 per cent higher than last year. This
was, in turn, affected by a stunning 369.2 per cent increase in the freight of iron ore meant for export. The
stupendous increase was due to export duties that were in place in July 2022 but were revoked later in the year.
The growth rate seen is a reflection of the low base last year.

Freight of coal by the railways expanded by a marginal 0.5 per cent to 61 million tonnes in July 2023. Thermal
coal freight decreased by 3.4 per cent, as a direct result of a huge 57.6 per cent drop in the freight of imported
thermal coal. This was cancelled out by a 10.4 per cent and 17.7 per cent increase in the freight of coal
transported to steel plants and that for other public uses, respectively.

Cargo traffic at major ports recorded a robust 4.3 per cent year-on-year increase in July 2023, as per tentative
data released by the Indian Ports Association (IPA). About 66.1 million tonnes of cargo was handled at major
ports. Containerised cargo traffic carried this increase. There was an 11 per cent increase in containerised
cargo traffic. This was complemented by a 3 per cent increase in POL traffic. About 15.2 million tonnes of
containerised cargo was seen at major ports, while POL traffic stood at 20.5 million tonnes. Iron ore traffic, led
by exports, recorded a stunning 137 per cent expansion to 4.4 million tonnes. Coal traffic at major ports fell by a
large 18.7 per cent to 13.8 million tonnes. The 16.8 per cent increase in coking coal traffic was made irrelevant
by a whopping 31.2 per cent fall in thermal and steam coal traffic.

A 3.9 per cent increase in high speed diesel consumption and a 16.4 per cent increase in e-way bills generation
point to a healthy growth in roadways traffic in July 2023.

Cargo Traffic via Various Modes of Transport (Y-o-Y % change)

  Mar 23 Apr 23 May 23 Jun 23 Jul 23
Railway freight traffic, of which 3.8 3.5 1.9 -1.9 1.5
  Coal 7.5 6.9 1.0 -3.7 0.5
  Iron ore 3.9 6.2 11.2 27.1 20.2
  Cement -1.8 5.7 6.8 5.4 -5.9
  Container service 8.1 7.3 4.6 -10.1 8.5
  Other goods 2.3 -11.8 0.5 -11.2 -2.1
Traffic at major ports, of which   1.3 3.2 -2.0  
  POL   -2.2 -2.9 2.8  
  Containerised cargo   5.0 7.0 -6.3  
  Coal   16.9 17.3 -11.2  
  Iron ore   -12.4 8.9 74.6  
  Other miscellaneous cargo   5.2 0.9 -10.0  
Traffic at airports          
  Passengers handled 27.0 25.5 19.0 20.5  
  Cargo handled -0.9 0.0 -0.3 -0.8  

Electricity requirement scales up

Electricity requirement went up year-on-year by 6.2 per cent to 136.6 billion kwh in July 2023. Electricity
availability also escalated by 6.4 per cent. This led to the deficit being restricted to 0.2 per cent. Peak demand
also increased by a handsome 8.6 per cent to 209 GW in July 2023.

Moving in line with requirement, electricity generation from conventional sources also expanded by 5.9 per cent
over last year to 125.9 billion kwh. Surprisingly, in spite of decent rainfall in the month, hydel power generation
was down by 9.5 per cent to 17.6 billion kwh. It was thermal power sources which helped meet the requirement
as they generated 9.3 per cent more electricity than they did last year. About 103.1 billion kwh electricity was
generated from thermal sources.
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Petroleum products consumption grew by a disappointing 1.9 per cent over last year to 18.1 million tonnes in
July 2023. Consumption of high speed diesel improved by 3.9 per cent to 6.9 million tonnes. Motor spirit
consumption expanded by 6.3 per cent to 3 million tonnes. Aviation turbine fuel (ATF) recorded a 14.8 per cent
growth. About 0.6 million tonnes of ATF was consumed in July 2023.

The increase in the consumption of transport fuels was almost offset by a fall in the consumption of naphtha,
petroleum coke, and ‘other petroleum products’. Naphtha consumption dropped by 7.3 per cent to 1.1 million
tonnes, while petroleum coke consumption slipped by 6 per cent to 1.6 million tonnes. Consumption of the
‘other petroleum products’ category fell by a whopping 17.5 per cent to one million tonne. Consumption of
lubricating oil also fell by a small 1.2 per cent to 0.3 million tonnes.

Other industrial fuels like light diesel oil (LDO), furnace oil, and bitumen and asphalt increased by 4.6 per cent,
2.1 per cent, and 55.8 per cent, respectively. This likely made the difference in the total petroleum products
consumption and helped its growth rate end in the green in July.

Cooking fuel, liquefied petroleum gas (LPG), remained largely flat with a meagre 0.6 per cent decrease in its
consumption. About 2.4 million tonnes of LPG was consumed in July 2023. There was a 114.6 per cent increase
in a consumption of superior kerosene. It was as surprising as it was rare. This was the first time in 19 years
that its consumption increased in triple digits. Albeit, the quantum of consumption is small at less than 0.1
million tonnes.

Energy Sector Performance (Y-o-Y % change)

  May 23 Jun 23 Jul 23 Apr-Jul 2022 Apr-Jul 2023
Gross generation of electricity, of which 1.1 2.4 5.9 12.2 1.6
  Coal 3.5 3.5 10.0 16.0 4.1
  Hydro -11.0 2.8 -9.5 5.6 -9.8
  Nuclear -0.8 -17.0 -4.6 0.4 -5.9
Petroleum products’ consumption, of which 12.6 4.5 1.9 16.2 5.1
  High speed diesel 12.7 3.1 3.9 17.3 7.1
  Motor spirit 11.0 6.2 6.3 23.1 6.7
  LPG 8.7 0.3 -0.6 0.9 2.0
  Petroleum coke 23.1 24.9 -6.0 56.0 3.5
  Naphtha 39.5 3.0 -7.3 -14.0 10.5
  Aviation turbine fuel (ATF) 12.6 9.2 14.8 84.9 13.7

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