Stock Market

India’s macros and micros: A divorced couple

With each passing day, the micro data from companies makes the macro GDP numbers look puzzling.

Savour the latest takeaways from the analysts’ call of Bharat Financial Ltd . The microfinance company said that improvement in collections has been slow: 4.4 percent of the portfolio has remained overdue for more than two months. In the normal course, this course would have been recognised as NPA (along with income reversal).  In addition, the shortfall in collections in the off book (6-12 percent) i.e. loans lent through business correspondents. In the quarter before demonetisation, the company had only 0.1 percent of gross non-performing assets or GNPAs.

While Equitas Holdings and Ujjivan Financial Services —other finance companies that lend to small borrowers have not yet given us the latest tally — saw scars in their Q3 performance. Fresh loan disbursements fell 20-25 percent from the previous quarter and that was because the collection of dues fell from their usual 99 percent-plus levels. Equitas it had loan defaults of Rs 145 crore, which it didn’t have to recognise because of the Reserve Bank of India’s relaxed rules.

Going up the food chain, Mahindra & Mahindra Financial Services said its GNPAs would have risen to 12.5 percent from 11.1 percent in the previous quarter but it was saved by RBI’s relaxed rules. Shriram Transport would have seen a jump in bad loans from 6.6 percent to 7.3 percent. Both saw barely any growth in loans.

The lack of demand or purchasing power of the Indian consumer was writ large on two-wheeler sales. Hero Moto , Bajaj and TVS saw sales dip by 5-22 percent in the months of November and December against a growth in sales of about 4 percent in the previous quarter. In fact, even in January and February, these companies continued to report 5-10 percent of lower sales from year-ago levels.

Among consumer companies basket, Asian Paints reported a 3 percent growth in Q3 volumes versus 12 percent in Q2 and 16 percent in the third quarter a year ago. Hindustan Unilever saw a 4 percent contraction in sales against a 6 percent growth year ago and 1 percent contraction in the previous quarter. Dabur saw a 5 percent contraction in volumes versus a 4.5 percent growth in the previous quarter, though its year-ago quarter saw poor volumes. And Britannia saw a 2 percent volume growth in Q3 versus an 11 percent growth year ago; while Marico saw a 4 percent contraction as against a 10.5 percent growth in sales volumes year ago.

The GDP numbers themselves show that the gross value added (GVA), which is growth, net of taxes, has slowed to 6.6 percent. But even this growth wouldn’t have been 6 percent had not the previous year’s number been revised lower just a few weeks before the release of the Q3 GDP numbers. The CSO’s revision of the 2015-16 GDP numbers of January 31 this year was puzzling. Overall, GDP growth was revised higher from 7.6% to 7.9%. The GVA for Q1, Q2 and Q4 were revised higher. Only for Q3 of 2015-16 the GVA was revised lower by about Rs 12,000 crore.

Even in the flattering 6.6 percent GVA — not counting the farm output and government spending — would have risen by only 5.8 percent.

Finally, making a mockery of the entire data collecting exercise is the GDP from the expenditure side which indicates that private consumption in the third quarter rose by 10.6 percent in the October-December period. If the top 10 listed consumption companies have reported contraction in sales volumes, it is tough to see which part of India was consuming so much.

One hopes the woefully divorced macros and micros of the Indian economy will be patched up somewhat next year when the revised GDP number for 2016-17 will be announced.