GRM Overseas Ltd Management Discussions

ECONOMIC OVERVIEW

Global Economy Overview

The global economy is doing well, with steady growth and infaLtion moderated from peak levels in 2022. It has been a rough journey, starting with supply-chain issues after the pandemic, a war started by Russia that caused a global energy and food crisis, and a big rise in inflation. This led to tightermonetarypolicyworldwide. Despite manyworries, a recession was avoided. The banking system mostly stayed strong, and major emerging markets did not face sudden crises. Even though inflation spiked and caused a cost-ofliving problem, it did not lead to out-of-controlwage and price increases.

Growth in employment and incomes held steady, reflecting supportive demand developments-including greater- than-expected government spending and household consumption and a supply-side expansion amid, notably, an unanticipated boost to labour force participation. The unexpected economic resilience, despite significant central bank interest rate hikes aimed at restoring price stability, also reflects the ability of households in major advanced economies to draw on substantial savings accumulated during the pandemic.

Global Economic Outlook

The global economy has grown at an estimated 3.2% in

pace in 2024 and 2025. This pace is low (when compared to historical standards) because of short-term factors such as still-high borrowing costs and withdrawal of fiscal support; and longer-term effects of the COVID-19 pandemic, which added to the dire effects of Russia- Ukraine conflict. Global trade may have longer impact of Red sea Crisis.

Global inflation is expected to decline from an annual average of 6.8% in 2023 to 5.9% in 2024 and 4.5% in 2025. Advanced economies will return to their inflation targets sooner than emerging markets and developing economies. Developed economies are expected to grow from

1.6% in 2023 to 1.7% in 2024 and 1.8% in 2025. But this growth is likely to offset by emerging and developing markets are expected to go from a growth rate of 4.3% in 2023 to 4.2% in 2024 and 2025.

(Source: The International Monetary Funds World EconomyOutlookreport)

Indian Economic Overview

The Indian economy is expected to sustain the growth at an estimated rate of 7.3% in FY24. This reflects the resilience of the economy despite dire geopolitical circumstances. Meanwhile, a global slowdown experienced by Indias major trading partners has led to a decline in Indias merchandise exports.

The industrial manufacturing sector has experienced a significant boost, attracting global technology giants like Apple eager to expand their supplier networks within India. This momentum is further supported by the implementation of state industrial policies that complement sector-specific incentive schemes. Concurrently, substantial investments in logistics and infrastructure development, including the construction of new roads, highways, and rail tracks, underscore the governments commitment to bolstering thiscriticalsector.

Indias strategic focus on reducing logistics costs is pivotal for its ambition to become a key player in global supply chains and become a US$5-trillioneconomy by the end of 2025. With an eye on the future, the country aims to achieve developed economy status by 2047, demonstrating a clear trajectorytowardssustained growth and development.

Moreover, Indias burgeoning domestic consumption played a crucial role in fostering economic growth, particularly as the nation surpassed China to become the worlds most populous country. By reducing its reliance on global demand and focusing on bolstering internal consumption, India managed to outpace the growth rates of other comparable countries. However, it is worth noting that the impact of the global economic scenario was not entirely impervious to India. As evidenced by the elevated headline inflation rate of 6.7% during the year, the country did experience some repercussions. Despite this, Indias overall economic performance remained resilient, a testament to its proactive measures and favorable conditions.

(Source: IMF World Economic Outlook, April 2023)

INDUSTRY OVERVIEW Indian FMCG Industry

The Fast-moving consumer goods (FMCG) sector is the 4th largest sector of the Indian economy. It is characterised by high turnover consumer packaged goods, i.e. goods that are produced, distributed, marketed and consumed within a short span of time. FMCG products that dominate the market today are detergents, toiletries, tooth cleaning products, cosmetics, etc.

The Indian Fast-Moving Consumer Goods (FMCG) sector has experienced remarkable growth, driven by rising consumer demand, product price increases, and the expansion of digital connectivity. The widespread use of smartphones, online banking, and e-commerce platforms has made FMCG products more accessible, even in rural areas. This digital and financial inclusion has spurred significant growth, with the FMCG market expected to achieve a Compound Annual Growth Rate (CAGR) of 27.9% from 2020 to 2027, reaching nearly USD 615.87 billion.

The FMCG industrys growth has also been fueled by innovation and product diversification. Companies have been constantly introducing new products to cater to the evolving tastes and preferences of the Indian consumer. The emphasis on product quality and packaging has furtherstrengthened consumertrust and loyaltyto wards various brands. Another aspect that has contributed to the expansion of the FMCG sector is the emergence of new distribution channels and marketing strategies. FMCG companies have adopted innovative distribution models and focused on building robustsupplychainsto reach even the most remote corners of the country efficiently. Additionally, digital marketing and social media campaigns have played a crucial role in enhancing brand visibility and attracting a broaderconsumerbase.

The sectors expansion is supported by increased rural consumption, higher disposable incomes, and a growing middle class. Innovations in product offerings, improved packaging, and new distribution channels have strengthened consumer loyalty and enhanced brand visibility. Digital marketing and robust supply chains have further contributed to this growth.

Despite the impressive growth, the FMCG industry in India also faces a few challenges that demand attention. Price volatility in essential commodities, changing regulatory landscapes, and increasing competition from both domestic and international players necessitate constant adaptation and strategic planning.

(Source: IBEF Report on FMCG Industry, February 2023)

Basmati Rice Industry

India remains the worlds second-largest producer of rice, largely due to its favorable climatic conditions, which enable it to meet more than 20% of global rice demand. The countrys diverse climatic zones support the cultivation of various rice varieties throughout the year, with major rice-producing regions located in the Eastern, North-Eastern, and Southern parts of India, all benefiting from conducive conditions foryear-round rice cultivation.

Among the myriad rice varieties, Basmati rice stands out for its distinguished reputation. It holds Geographical Indication (GI) status in India, meaning it can only be marketed under this name if grown in specific regions within the country. Cultivating Basmati rice requires precise agro-climatic conditions, specific geographic locations, and meticulous practices in plant nutrition, agronomy, harvesting, processing, and aging. Renowned for its unique aroma, texture, and flavor, Basmati rice is a prized ingredient in global culinary traditions, offering a range of varieties each with distinct characteristics.

As of March 31, 2024, India continues to be the largest producer and exporter of Basmati rice globally. In the fiscal year 2023-24, the value of total Basmati rice exports from India reached Rs. 421.75 billion, reflecting a Compound Annual Growth Rate (CAGR) of 8.3% from FY2020-23.

(Source: APEDA - Agricultural and Processed Food Products Exports DevelopmentAuthority)

In the fiscal year 2024, basmati rice exports have achieved remarkable growth in both volume and value. According to the latest data, shipments from April to February have surpassed $5.2 billion, with volumes exceeding 4.67 million tonnes, setting a new high. While the exports forthe entire fiscal year are projected to establish a new record once the figures for March are incorporated, concerns arise due to prevailing geopolitical tensions in the Middle East,which is a key market accounting for over 70 percent of basmati exports.

The recent conflict between Iran and Israel in the region may pose significant challenges for Indian exporters in the new financial year. The situation is being closely monitored, as its potential impact on basmati rice exports remains uncertain. Indian exporters have already faced difficulties as a result of recent attacks in the Red Sea region, leading to increased shipping costs and transit time to destinations such as Europe and the United States.

However, analysts believe that the ongoing tensions may also result in higherexports and prices. Countries like Iran and Iraq currently possess sufficient stock to weather any geopolitical fallout, while other Gulf nations such as Saudi Arabia, Oman, Qatar, and the UAE may face shortages. This could potentially lead to a fresh surge in export orders for basmati rice, accompanied by increased prices due to additionaldemand and riskpremium.

Indian Basmati Rice Industry Outlook

A highlight of the Indian Basmati rice industry is the excess demand from key markets in the Middle East, USA and UK. The demand for Basmati is expected to remain stable throughout the marketing year 2024-2025.

Even the domestic demand for packaged Basmati rice is expected to remain steady owing to consumption preferences shifting from loose to packaged rice resulting from growing urbanisation, quality assurance, increasing household consumption and expenditure trends.