The December quarter GDP numbers will be released in shortly from now. However, ahead of the data release, an analysis of 1,722 manufacturing companies' quarterly results for Q3 FY21 by ICICI Securities points at robust recovery. The total income of the sample companies recorded a flat year-on-year (y-o-y) growth against a steep decline of 39 per cent and 10 per cent in Q1 and Q2, respectively.
"This indicates that manufacturing sector's performance is normalising after recording sharp contraction during H1 FY21, which marked the worst of COVID-19 related lockdowns and restrictions," says the report.
According to the analysis, GVA equivalent of manufacturing companies arrived at after adding up wages, depreciation, interest and profit before tax (PBT) grew a robust 17 per cent, on a yearly basis in Q3 FY21, after a 9 per cent growth in Q2 this fiscal and 29 per cent contraction in the previous quarter.
"The GVA equivalent shares a strong correlation with manufacturing GVA and is a leading indicator of the sector's quarterly performance," the report further states.
In many cases, GVA equivalent is a better predictor of manufacturing sector's performance than IIP since the latter captures volume of production while the former captures value of production, ICICI Securities argues. Hence, manufacturing sector is expected to record a healthy growth in the upcoming Q3FY21 GDP data release.
Reproducing the same calculations on a common sample of 1,681 manufacturing companies using prowess database yielded similar results. The GVA equivalent of the sample grew 23.4 per cent, on a yearly basis after a 9.2 per cent and (-)27.3 growth in the past two quarters. The total income of the sample posted a flattish growth of (-)0.1 per cent after a 10.8 per cent and sharp 42 per cent fall in the second and first quarter each. The manufacturing GVA currently has a share of 19 per cent in country's real gross value added which adds weight.