Macro indicators such as eway bill generation bounced back in June to 16.98 million till June 20 compared to 15 million in May, while consumption of petrol, diesel and power increased, also indicating heightened economic activity, say experts.
Industry executives expect further recovery going forward as vaccinations improve consumer sentiment, but some say overall growth in FY22 will be lower than initially estimated due to a washout of business activity for over a month. Further, a possible third Covid wave later this year could derail recovery.
Auto
With more than 80% of automobile retail outlets now operational, passenger vehicle (PV) sales in June are expected to recover to 75% of the 270,000 units sold each month before the second Covid wave. PV sales were at 28% of average monthly retail in May. PV sales in FY22 are likely to be at around 3.1-3.3 million units with two-wheeler sales at 16.3-17.1 million units, down 5-10 percentage points from initial estimates.
Strong Growth for FMCG, Ecomm
Physical retail: Physical retail sales have improved, but only slightly, in June compared to May, amid tepid consumer sentiment and with malls and markets continuing to be shut in crucial states such as Maharashtra and Karnataka.
Retailers expect a faster recovery in the coming months on pent-up demand, but are nervous about a third Covid wave that some fear may hit India in September or October, just before Diwali when the sector rakes in almost 40% of their annual business.
Ecommerce: Ecommerce companies expect 10% higher sales in June compared to May, as lockdown restrictions ease and state governments allow sale of all goods through the channel.
Companies are lining up sale events to get consumers to spend more. A leading etailer with an omni-channel play said it has seen 70% recovery so far and expects a full recovery to pre-second wave numbers by end of July.
Consumer electronics: Refrigerator, washing machine, television and microwave oven sales grew by 10-15% on year in the first three weeks in June – and by 70-80% compared with May – in North, West and East. But markets in the South are still largely closed with only e-commerce or home deliveries allowed.
The industry expects a complete recovery in July-September and October-December quarters due to pent-up demand, with states expected to remove all restrictions and high vaccination numbers improving consumer sentiments. In fact, most companies expect a 10-15% growth in festive season sales over last year, when the industry reported record numbers.
Smartphones: Pent-up demand has meant a strong recovery in June for smartphones, with sales expected at around 11 million units compared with 6 million in May, and 12.5 million units in the pre-second wave month of March.
Overall outlook for 2021 is sales of around 150-160 million units, almost the same as in 2020, but lower than the over 170 million units initially estimated, according to industry players.
PC Sales: Companies have seen a strong bounce back in PC and printer sales in June in both the home market as with enterprise customers, amid a gradual opening up from lockdowns and with the school season reopening in most parts of the country.
FMCG: The fast-moving consumer goods (FMCG) market expanded 15% in the first two weeks of June from May, and executives expect the momentum to continue till at least Diwali, leading to a better second half.
The HoReCa (hotels, restaurants, catering) channel however continues to struggle amid tepid consumer sentiment, say industry executives. “While HoReCa is not growing as fast as the retail channel, we expect the segment to grow as things open-up,” said Angshu Mallick, chief executive of Adani Wilmar, which sells the Fortune brand.
Food delivery: A segment which stood strong during the restrictions was food delivery, and according to executives, order volumes and sales have continued to rise in June despite lockdown restrictions lifting in some states.
Cloud kitchen platform Rebel Food reported a 20-25% uptick in sales and order volume in June over May and a 50% increase compared to April this year
Hospitality: The hospitality industry and travel platforms are seeing a notable uptick in June, with more flight and hotel bookings. Industry tracker STR estimated a 40-45% spike in occupancies pan-India around the June 19 weekend, from May levels, when all India occupancy levels were a little under 20%.
Industry executives expect workations and staycations to drive-to destinations to drive business this year. But ratings agency ICRA says recovery to pre-Covid levels is still at least two years away.
Aviation: The aviation sector, a key indicator of business activity, has also shown recovery, with airlines flying over 100,000 passengers daily on several days in June, compared with an average around 31,000 during May.
Airlines expect passenger numbers to return to earlier levels – domestic passenger numbers had reached a high of 300,000 per day earlier this year – faster, mainly on the back of vaccinations. But a third wave could hit their revival plans, warn industry executives.
Digital Payments: In signs of increased business activity across sectors, Unified Payments Interface (UPI) – the most used real-time payment system in India – grew 12.3% in the first 21 days of June over May, while payments made through debit and credit cards recorded 12.7% and 18.6% growth, respectively, as per RBI data. Similarly, cash withdrawals at teller machines across the country – a proxy for cash spends – grew 6.4%.
According to experts, as vaccination drives pick pace and the restrictions around entertainment and dining are lifted further, payment companies are expected to process higher volumes going forward.
Petroleum: Sales of petrol and diesel grew 12% and 13%, respectively, in the first half of June, from a month ago.
Demand for petrol and sales is expected to grow further as lockdown restrictions ease, but record-high prices will act as a check, industry executives say.
Power: Electricity demand has risen to 3.9 billion units per day since the beginning of June, up from the lows of 3.5 billion units per day in May. Experts expect demand to strengthen further over the next few weeks.
Power consumption is also up 7% on year so far in June, and sectoral observers expect around 4-5% increase in demand in FY22, provided there are no further lockdowns in the country.
Steel, Cement: After a washout in May, demand for steel and cement is seeing a gradual rise in line with construction activity, say industry experts, who though point out that the July-September quarter is a seasonally weak one, owing to the monsoons.
managing director Hari Mohan Bangur expects demand for cement to grow at 10-20% in the July-September quarter.
Real estate: Of the total housing sales of nearly 24,570 units across the top seven cities in April-June, over 55% were concluded in June, followed by around 30% in the month of April.
Given that housing has gained more significance amid Covid-19, realtors expect to see recovery from the third quarter of 2021.
