India inc's sales growth more than doubled in the last quarter of 2009-10 (27.5 per cent in Q4 versus 12.7 per cent in Q3).
As a result, the Q4 GDP numbers show manufacturing grew a whopping 16.3 per cent, a record for the last 8 quarters -- for the full year, manufacturing grew 10.8 per cent (3.2 per cent in 2008-09).
A sharp hike in global commodity prices meant that India Inc's raw material costs rose 38 per cent and, since they constitute 41 per cent of sales revenues, this lowered profits growth to 35 per cent (from 62 per cent in Q3).
Profit margins, however, continued to rise and are now at levels seen around a year ago. Investment levels continue to grow steadily, and India Inc's order books doubled from Rs 52,546 crore in Q3 to Rs 1,00,081 crore in Q4.
On a sequential (q-o-q) basis, gross domestic product data show that, at 16.9 per cent, investment levels have not grown faster in the last 8 quarters.
A possible area of worry for the next few quarters could be the lower level of growth of private consumption as well as government consumption.
From 60.4 per cent of gross domestic product at 2004-05 prices in Q3, private consumption was down to 51.1 per cent in Q4; government consumption was down from 13.1 per cent to 11.2 per cent in Q4.
While the fall in government consumption is reflective of the rollback of the post-Lehman stimulus spending, the reduction in private expenditure cannot be explained except to say it may be a statistical quirk -- in 2008-09, as well, private consumption fell on a sequential basis in Q4.
Interest rates rising and credit markets tightening post-Greece will impact profits; though companies continue to sit on piles of cash (equal to a seventh of annual sales).
Profit margins for PSU oil sector firms will fall once again as the government dilly-dallies on freeing pricing; and telecom firms are under stress with the 3G/BWA auction prices spiralling out of control -- in the case of Bharti, the Zain acquisition adds to the immediate debt profile.
With Q4 GDP up 8.6 per cent and agriculture up 0.7 per cent (it was -1.8 per cent in Q3), however, most are looking forward to an even better quarter.
